UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4386
Van Kampen Tax Free Trust
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 9/30
Date of reporting period: 9/30/06
Item 1. Reports to Shareholders.
The Fund'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 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 September 30, 2006.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I [AND R] SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUSES CONTAIN INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. 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 9/30/06
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Municipal Bond Index from 9/30/96 through 9/30/06. Class A shares, adjusted for
sales charges.
(LINE GRAPH)
<Table>
<Caption>
LEHMAN BROTHERS MUNICIPAL BOND
VAN KAMPEN INSURED TAX FREE FUND INDEX
-------------------------------- ------------------------------
9/96 9523 10000
9629 10113
9822 10298
9777 10255
9752 10274
9840 10369
9694 10230
9767 10316
9903 10471
10008 10583
10328 10876
10181 10774
9/97 10297 10902
10350 10972
10419 11037
10577 11197
10685 11313
10674 11316
10666 11326
10579 11275
10777 11454
10821 11499
10837 11528
11026 11706
9/98 11171 11852
11138 11851
11169 11893
11175 11923
11299 12065
11245 12012
11231 12029
11252 12059
11150 11989
10926 11816
10947 11859
10797 11764
9/99 10746 11769
10588 11642
10704 11765
10613 11678
10549 11627
10739 11762
11003 12019
10914 11948
10829 11886
11156 12201
11329 12371
11498 12561
9/00 11405 12496
11546 12632
11644 12728
12012 13042
12079 13172
12114 13213
12213 13332
12006 13187
12144 13329
12236 13418
12444 13617
12654 13842
9/01 12577 13795
12729 13959
12587 13842
12475 13711
12664 13949
12833 14117
12545 13840
12789 14111
12883 14196
13018 14346
13202 14531
13380 14705
9/02 13745 15028
13467 14778
13420 14717
13697 15028
13606 14990
13816 15199
13818 15208
13964 15309
14299 15667
14147 15601
13573 15055
13748 15167
9/03 14144 15613
14063 15534
14248 15696
14351 15826
14375 15917
14648 16156
14507 16100
14146 15719
14118 15662
14166 15719
14359 15926
14646 16245
9/04 14740 16331
14843 16472
14675 16336
14906 16535
15098 16690
15013 16634
14865 16529
15114 16790
15252 16909
15331 17013
15274 16937
15418 17108
9/05 15296 16992
15206 16889
15279 16970
15429 17116
15479 17162
15654 17278
15519 17158
15501 17153
15568 17229
15465 17164
15643 17368
15881 17626
9/06 15983 17749
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 12/14/84 since 5/03/93 since 8/13/93 since 8/12/05
- ---------------------------------------------------------------------------------------------------
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 W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES
Since Inception 7.54% 7.30% 4.76% 4.76% 4.47% 4.47% 4.36%
10-year 5.31 4.80 4.66 4.66 4.50 4.50 n/a
5-year 4.91 3.89 4.12 3.87 4.11 4.11 n/a
1-year 4.49 -0.47 3.71 -0.23 3.66 2.67 4.75
- ---------------------------------------------------------------------------------------------------
SEC Yield 3.35% 2.77% 2.77% 3.76%
</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 eight years after purchase. The since inception
returns for Class C shares reflect their conversion into Class A shares ten
years after purchase. Class I shares are available for purchase exclusively by
investors through (i) tax-exempt retirement plans with assets of at least $1
million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least $1 million and (iii) institutional clients with assets of at least $1
million. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. Figures
shown above assume reinvestment of all dividends and capital gains. SEC yield is
a calculation for
1
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.
2
Fund Report
FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
MARKET CONDITIONS
Against the backdrop of strong economic growth, good employment data and
inflationary pressures stemming from rising oil prices, the Federal Open Market
Committee (the "Fed") continued its tightening campaign during the first nine
months of the reporting period, raising the federal funds target rate six times
to 5.25 percent at the end of June. As the months progressed however, economic
growth moderated as consumer spending and housing weakened while inflation
concerns eased, prompting investors to speculate that the Fed would take a break
from rate increases. In August the Fed did pause, ending a two-year run of 17
consecutive rate increases -- the longest stretch of increases in 25 years. At
its September meeting, the Fed again kept its target rate unchanged, and
indicated that any future rate increases would be driven by the weight of
economic data.
As a result of the improved outlook for the fixed income market, yields on
longer-maturity municipal bonds fell dramatically in latter months of the
reporting year, ultimately ending at the lowest level in decades. Yields on
shorter-maturity municipal bonds, however, moved higher. Accordingly, the slope
of the municipal yield curve flattened as the spread between short-term and
long-term interest rates narrowed.
Demand for municipal bonds continued to be strong during the period. In fact,
inflows into municipal bond funds were 45 percent higher year-to-date through
September than for the same period last year, much of which went into high yield
funds. Because prevailing interest rates were still at relatively low levels,
investors increasingly sought out lower-quality, higher yielding bonds. The
increased demand for high yield bonds led this segment of the market to
considerably outperform high-grade issues. In addition, long-term bonds
continued to earn the best returns, while the short end of the curve posted the
lowest returns as Fed rate increases moved yields in this portion of the curve
higher.
Although municipal bond issuance remained brisk in the last quarter of 2005,
volume declined throughout the remaining months of the period. As of the end of
September, national municipal bond issuance was down 14 percent for 2006. The
reduced supply, coupled with growing demand, further fueled municipal bond
performance.
3
PERFORMANCE ANALYSIS
The fund returned 4.49 percent for the 12 months ended September 30, 2006 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark,
the Lehman Brothers Municipal Bond Index, returned 4.45 percent for the period.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN
BROTHERS
MUNICIPAL
CLASS A CLASS B CLASS C CLASS I BOND INDEX
4.49% 3.71% 3.66% 4.75% 4.45%
- --------------------------------------------------------------
</Table>
The performance for the four 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.
A variety of factors contributed positively to the fund's performance during the
reporting year. Reflecting our view that Treasury rates would continue to rise,
we kept the portfolio's duration (a measure of interest-rate sensitivity) lower
than that of its benchmark for the first eight months of the period. This
conservative positioning benefited the fund as interest rates continued to climb
as anticipated. In June, when economic data started to weaken and it appeared
that rates were done climbing, we increased the duration of the portfolio to be
more in line with the Lehman Brothers Municipal Bond Index. This less-defensive
positioning also contributed positively to fund returns as the yield curve began
to flatten in the latter months of the period.
The fund's positioning along the yield curve remained consistent throughout the
period. We favored the longer-term segment of the curve, purchasing bonds
primarily in the 25-to-30 year maturity range. This proved advantageous as
longer-dated issues outperformed those with shorter maturities. We also
purchased premium coupon bonds priced to 10 years or shorter, and added to the
fund's holdings in inverse floating-rate securities,* both of which added income
to the fund. We continued to avoid zero coupon bonds, which have been volatile,
as well as non-callable bonds. The fund also benefited considerably from new
issues being brought into the marketplace that refunded current holdings in the
portfolio, which allowed the fund to capture appreciation gains.
For hedging purposes, we used Bond Market Association (BMA) swaps and to a
lesser extent, Treasury futures. BMA swaps are more closely tied to the
*An inverse floating-rate security, or "inverse floater", is a variable rate
security whose coupon rate changes in the opposite direction from the change in
the reference rate used to calculate the coupon rate.
4
municipal market than are Treasury futures, which we believe makes them a more
effective hedging tool.
The fund maintained an emphasis on the essential services sectors of the market,
such as water and sewer and education bonds. We selectively added some health
care issues to the portfolio but continued to avoid housing bonds. These factors
were also additive to performance whereas an underweight relative to the Lehman
Brothers Municipal Bond Index in the tax-supported debt and education sectors
tempered returns somewhat. We continued to keep the fund's Alternative Minimum
Tax (AMT) exposure low, at approximately two percent of total assets.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
5
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
California 15.8%
Illinois 13.9
Washington 9.1
Florida 6.8
Alabama 6.5
Texas 6.3
Georgia 4.7
Pennsylvania 3.3
Indiana 3.2
South Carolina 2.6
Louisiana 2.4
Oklahoma 2.3
Colorado 2.1
Arizona 1.7
Nevada 1.5
New York 1.3
Alaska 1.2
North Carolina 1.2
Missouri 1.2
South Dakota 1.1
Nebraska 1.0
North Dakota 1.0
Wisconsin 0.8
Arkansas 0.8
Michigan 0.6
Ohio 0.6
New Jersey 0.6
Mississippi 0.6
New Mexico 0.5
District of Columbia 0.5
Montana 0.3
Massachusetts 0.3
Utah 0.3
Oregon 0.3
Puerto Rico 0.3
Tennessee 0.2
New Hampshire 0.2
Iowa 0.2
West Virginia 0.1
-----
Total Long-Term Investments 97.4%
Short-Term Investments 5.8
-----
Total Investments 103.2
Liabilities in Excess of Other Assets (3.2)
-----
Net Assets 100.0%
</Table>
6
<Table>
<Caption>
CREDIT QUALITY AS OF 9/30/06
AAA/Aaa 100.0%
</Table>
<Table>
<Caption>
TOP FIVE SECTORS AS OF 9/30/06
Public Education 16.2%
Wholesale Electric 10.8
Higher Education 10.7
Airports 10.4
Water & Sewer 9.1
</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 total long-term investments. Summary of investments by state
classification are 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.
7
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. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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 (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 (800) 847-2424.
8
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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.
9
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 charges on redemptions of Class B and Class C
Shares; and redemption fees; 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 4/1/06 - 9/30/06.
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
account values and 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 or redemption fees.
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*
-------------------------------------------------
4/1/06 9/30/06 4/1/06-9/30/06
Class A
Actual..................................... $1,000.00 $1,029.73 $4.48
Hypothetical............................... 1,000.00 1,020.67 4.46
(5% annual return before expenses)
Class B
Actual..................................... 1,000.00 1,025.94 8.28
Hypothetical............................... 1,000.00 1,016.87 8.24
(5% annual return before expenses)
Class C
Actual..................................... 1,000.00 1,025.96 8.28
Hypothetical............................... 1,000.00 1,016.87 8.24
(5% annual return before expenses)
Class I
Actual..................................... 1,000.00 1,030.98 3.21
Hypothetical............................... 1,000.00 1,021.97 3.19
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.88%, 1.63%,
1.63%, and 0.63% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
10
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
11
together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees
12
discuss with the investment adviser its revenues and expenses, including among
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
13
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
MUNICIPAL BONDS 97.4%
ALABAMA 6.5%
$ 1,385 Alabama St Brd Ed Rev Calhoun Cmnty College
(AMBAC Insd)................................... 5.000% 05/01/21 $ 1,484,263
200 Alabama St Brd Ed Rev Calhoun Cmnty College
(AMBAC Insd)................................... 5.000 05/01/22 213,884
2,255 Alabama St Brd Ed Rev George C Wallace Cmnty
College (AMBAC Insd) (a)....................... 5.250 07/01/23 2,436,911
1,095 Birmingham, AL Wtrwks & Swr Brd Ser A (FGIC
Insd) (a)...................................... 5.000 01/01/21 1,162,945
2,000 Birmingham, AL Wtrwks & Swr Brd Wtr & Swr Rev
(FSA Insd)..................................... 4.500 01/01/35 1,995,120
1,900 Birmingham, AL Wtrwks & Swr Brd Wtr & Swr Rev
(FSA Insd)..................................... 5.000 01/01/40 1,992,416
3,590 Clarke & Mobile Cnty AL Gas Dist Rev (AMBAC
Insd) (a)...................................... 5.250 01/01/21 3,906,315
3,670 Houston Cnty, AL Hlthcare Auth Ser A (AMBAC
Insd).......................................... 5.250 10/01/30 3,977,142
3,120 Huntsville, AL Hlthcare Auth Ser A (MBIA
Insd).......................................... 5.400 06/01/22 3,403,078
2,500 Huntsville, AL Hlthcare Auth Ser A (MBIA
Insd).......................................... 5.500 06/01/27 2,727,125
14,255 Jefferson Cnty, AL Pub Bldg Auth Lease Rev Wt
(AMBAC Insd)................................... 5.000 04/01/26 15,146,935
5,000 Mobile, AL Wt Impt & Rfdg (AMBAC Insd)......... 5.000 02/15/23 5,341,150
5,280 Montgomery Cnty, AL Pub Bldg Wt Auth Rev Fac
Proj (MBIA Insd) (a)........................... 5.000 03/01/24 5,607,835
5,550 Montgomery Cnty, AL Pub Bldg Auth Rev Wt Fac
Proj (MBIA Insd) (a)........................... 5.000 03/01/25 5,890,159
8,000 Trussville, AL Wt Ser A (FGIC Insd)............ 5.000 10/01/31 8,466,560
10,000 Trussville, AL Wt Ser A (FGIC Insd)............ 5.000 10/01/36 10,537,200
--------------
74,289,038
--------------
ALASKA 1.2%
2,000 Alaska St Hsg Fin Corp Gen Hsg Ser A
(FGIC Insd).................................... 5.000 12/01/30 2,094,800
1,000 Alaska St Hsg Fin Corp Gen Hsg Ser A
(FGIC Insd).................................... 5.250 12/01/41 1,059,520
4,025 Alaska St Intl Arpt Rev Rols RR II 527 (Inverse
Fltg) (Acquired 03/10/06, Cost $4,902,388)
(MBIA Insd) (a) (b)............................ 8.267 10/01/24 5,102,251
4,000 Alaska St Intl Arpt Rev Ser A Rfdg (AMT) (MBIA
Insd).......................................... 5.000 10/01/21 4,225,720
1,425 Anchorage, AK Wtr Rev Rfdg (AMBAC Insd)........ 6.000 09/01/19 1,528,768
--------------
14,011,059
--------------
ARIZONA 1.7%
1,940 Arizona St Univ Ctf Partn Resh Infrastructure
Proj (AMBAC Insd).............................. 5.250 09/01/23 2,097,043
1,225 Arizona St Univ Ctf Partn Resh Infrastructure
Proj (AMBAC Insd).............................. 5.250 09/01/24 1,322,436
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
ARIZONA (CONTINUED)
$ 2,900 Arizona Tourism & Sports Auth Multi Purp Stad
Fac Ser A (MBIA Insd).......................... 5.375% 07/01/22 $ 3,153,489
5,000 Maricopa Cnty, AZ Pollutn Ctl Corp Pollutn Ctl
Rev El Paso Elec Co Ser A Rfdg (FGIC Insd)..... 4.800 08/01/40 5,019,700
640 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
Oblig Irvington Proj Tucson Elec Pwr Co Ser A
Rfdg (FSA Insd)................................ 7.250 07/15/10 642,451
1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd)................... 6.000 09/01/12 1,951,687
1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd)................... 6.125 09/01/17 1,820,525
300 University AZ Ctf Partn Ser A (AMBAC Insd)..... 5.000 06/01/23 319,635
825 University AZ Ctf Partn Ser B (AMBAC Insd)..... 5.000 06/01/22 880,852
300 University AZ Ctf Partn Ser C (AMBAC Insd)..... 5.000 06/01/21 320,763
1,585 University AZ Ctf Partn Ser C (AMBAC Insd)..... 5.000 06/01/22 1,692,304
--------------
19,220,885
--------------
ARKANSAS 0.8%
2,500 Arkansas St Dev Fin Auth Rev St Agy Fac
Donaghey Plaza Proj (FSA Insd)................. 5.000 06/01/29 2,625,700
6,265 Little Rock, AR Sch Dist Ser B Rfdg (FSA
Insd).......................................... 5.500 02/01/25 6,591,657
--------------
9,217,357
--------------
CALIFORNIA 15.8%
4,000 Bay Area Govt Assn CA Rev Tax Alloc CA Redev
Pool Ser A (XLCA Insd)......................... 5.250 09/01/35 4,267,920
3,225 Bay Area Govt Assn CA Rev Tax Alloc Ser A
(AMBAC Insd) (a)............................... 4.500 09/01/25 3,264,829
3,205 Bell, CA Cmnty Hsg Auth Lease Rev Rfdg (AMBAC
Insd).......................................... 5.000 10/01/30 3,386,980
3,310 Bell, CA Cmnty Hsg Auth Lease Rev Rfdg (AMBAC
Insd).......................................... 5.000 10/01/36 3,462,624
3,500 California Ed Fac Auth Rev Occidental College
Ser A (MBIA Insd).............................. 5.000 10/01/36 3,685,325
3,000 California St Pub Wks Brd UCLA Replacement Hosp
Ser A (FSA Insd)............................... 5.375 10/01/20 3,255,780
3,000 California St Pub Wks Brd UCLA Replacement Hosp
Ser A (FSA Insd)............................... 5.000 10/01/22 3,154,650
5,000 California Stwide Cmnty Depooled Fin Pg Ser
2004A (FSA Insd)............................... 5.250 10/01/24 5,405,300
4,615 California Stwide Cmnty Dev Auth Wtr & Wastewtr
Rev Ser D (FSA Insd) (a)....................... 5.000 10/01/26 4,912,621
3,000 California Stwide Cmnty Pooled Fin Pg Ser 2004A
(FSA Insd)..................................... 5.000 10/01/29 3,158,610
4,000 California Stwide Cmnty Pooled Fin Pg Ser 2004A
(FSA Insd)..................................... 5.250 10/01/34 4,257,600
2,980 California Stwide Cmnty Pooled Fin Pg Ser 2004C
(FSA Insd) (a)................................. 5.000 10/01/29 3,137,553
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 7,430 Capistrano, CA Uni Sch Dist (FGIC Insd) (a).... 5.000% 09/01/25 $ 7,899,502
7,995 Capistrano, CA Uni Sch Dist (FGIC Insd) (a).... 5.000 09/01/26 8,481,895
8,600 Capistrano, CA Uni Sch Dist (FGIC Insd) (a).... 5.000 09/01/27 9,117,118
3,500 Capistrano, CA Uni Sch Dist (FGIC Insd)........ 5.000 09/01/29 3,702,440
5,000 Chino Vly Uni Sch Dist CA Election 2002 Ser C
(MBIA Insd).................................... 5.250 08/01/30 5,428,250
3,225 Coronado, CA Cmnty Dev Agy Tax Alloc Coronado
Cmnty Dev Proj (AMBAC Insd).................... 5.000 09/01/30 3,391,926
425 Earlimart, CA Elem Sch Dist Ser 1 (AMBAC
Insd).......................................... 6.700 08/01/21 559,045
265 Golden West Sch Fin Auth CA Rev Ser A Rfdg
(MBIA Insd) (a)................................ 5.750 08/01/19 314,279
10,000 Hawthorne, CA Cmnty Redev Agy Tax Alloc Proj
Area No 2 (XLCA Insd).......................... 5.250 09/01/36 10,756,200
690 Jurupa, CA Univ Sch Dist Election 2001 (FGIC
Insd).......................................... 5.000 08/01/26 725,204
3,360 Loma Linda, CA Redev Agy Tax Alloc Ser A (XLCA
Insd).......................................... 5.250 07/01/30 3,609,648
540 Long Beach, CA Bd Fin Auth Rev Redev Hsg & Gas
Util Fin Ser A1 (AMBAC Insd)................... 5.000 08/01/40 562,037
5,000 Los Angeles, CA Uni Sch Dist Elec of 1997- Ser
F (FGIC Insd).................................. 5.000 07/01/25 5,294,050
3,700 Marin, CA Cmnty College Dist Election of 2004
Ser A (MBIA Insd).............................. 5.000 08/01/26 3,934,728
10,000 Merced, CA Irr Dist Rev Ctf Partn Elec Sys Proj
(XLCA Insd).................................... 5.250 09/01/36 10,708,900
4,000 Murrieta Vy, CA Uni Sch Dist Pub Fin Auth Spl
Tax Rev (AGL Insd)............................. 4.750 09/01/36 4,058,360
765 North Monterey Cnty, CA Uni Sch Dist Election
2002 Ser B (FGIC Insd)......................... 4.750 08/01/29 787,499
3,455 Oxnard, CA Fin Auth Headworks Proj (AMBAC Insd)
(a)............................................ 5.000 06/01/36 3,629,167
2,070 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd)
(a)............................................ 5.250 10/01/23 2,245,018
5,000 Palm Springs, CA Fin Lease Rev Convention Ctr
Proj Ser A (MBIA Insd)......................... 5.500 11/01/29 5,558,050
2,250 Riverside, CA Ctf Partn (AMBAC Insd) (a)....... 5.000 09/01/23 2,367,427
1,840 Rohnert Park, CA Swr Sys Rev Ctf Partn Spl Term
(AMBAC Insd)................................... 5.000 06/01/30 1,932,994
3,200 Rohnert Park, CA Swr Sys Rev Ctf Partn Spl Term
(AMBAC Insd) (a)............................... 5.000 06/01/36 3,347,552
5,000 Sacramento Cnty, CA San Dist Fin Auth Rev
Sacramento Regl Cnty San (FGIC Insd)........... 5.000 12/01/29 5,325,200
8,985 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd).... 5.375 03/01/18 9,761,124
1,285 San Marcos, CA Pub Fac Auth Rols RR II 514
(Inverse Fltg) (Acquired 02/10/06, Cost
$1,567,751) (AMBAC Insd) (b)................... 8.358 10/01/31 1,602,986
2,785 Santa Monica, CA Cmnty College Ser A Rfdg
(AMBAC Insd)................................... 5.000 02/01/27 2,916,257
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 1,775 Sierra, CA Jt Cmnty College Impt Dist 2 Westn
Nevada Ser A (FGIC Insd) (a)................... 5.000% 08/01/28 $ 1,871,951
1,960 Sierra, CA Jt Cmnty College Impt Dist 2 Westn
Nevada Ser A (FGIC Insd) (a)................... 5.000 08/01/29 2,064,370
5,380 South Orange Cnty, CA Pub Fin Auth Spl Tax Rev
Ladera Ranch Ser A (AMBAC Insd)................ 5.000 08/15/27 5,710,278
2,000 South Tahoe, CA Jt Pwr Fin Redev Proj Area No 1
Ser A Rfdg (AMBAC Insd)........................ 5.000 10/01/35 2,095,240
2,110 Val Verde, CA Uni Sch Dist Ctf Sch Constr Proj
Ser B Rfdg (FGIC Insd) (a)..................... 5.000 01/01/22 2,247,066
2,370 Val Verde, CA Uni Sch Dist Ctf Sch Constr Proj
Ser B Rfdg (FGIC Insd)......................... 5.000 01/01/30 2,484,945
1,100 Vallejo City, CA Uni Sch Ser A Rfdg (MBIA
Insd).......................................... 5.900 08/01/25 1,331,352
--------------
181,171,850
--------------
COLORADO 2.1%
3,745 Colorado Ed & Cultural Fac Auth Rev Charter Sch
Aurora Academy Sch Proj Ser A Rfdg (XLCA Insd)
(a)............................................ 5.250 02/15/34 3,983,519
2,500 Colorado Ed & Cultural Fac Auth Rev Charter Sch
Bromley Sch Proj Rfdg (XLCA Insd).............. 5.250 09/15/32 2,685,600
1,000 Colorado Ed & Cultural Fac Auth Rev Charter Sch
Woodrow Wilson Sch Proj Ser A Rfdg
(XLCA Insd).................................... 5.250 12/01/34 1,073,280
5,000 Colorado Ed & Cultural Fac Auth Rev Frontier
Academy Rdfg (CIFG Insd) (c)................... 4.375 06/01/26 4,936,700
5,000 Denver, CO City & Cnty Arpt Rev Sys Ser A (XLCA
Insd).......................................... 5.000 11/15/25 5,321,900
1,175 Thornton, CO Ctf Partn (AMBAC Insd)............ 5.375 12/01/19 1,275,568
3,080 Thornton, CO Ctf Partn (AMBAC Insd) (a)........ 5.375 12/01/21 3,328,648
1,650 Thornton, CO Ctf Partn (AMBAC Insd)............ 5.375 12/01/22 1,783,205
--------------
24,388,420
--------------
DISTRICT OF COLUMBIA 0.5%
1,000 District of Columbia Ctf Partn Dist Pub Safety
& Emergency (AMBAC Insd)....................... 5.500 01/01/19 1,095,240
4,000 Metropolitan Washington DC Arpt Ser A (AMT)
(FSA Insd)..................................... 5.000 10/01/32 4,192,560
--------------
5,287,800
--------------
FLORIDA 6.8%
1,000 Brevard Cnty, FL Sch Brd Ctf Partn Ser A (AMBAC
Insd).......................................... 5.400 07/01/12 1,087,610
500 Dade Cnty, FL Aviation Rev Ser B (MBIA Insd)... 5.600 10/01/26 510,665
1,000 Dade Cnty, FL Ed Fac Auth Rev Exchanged From
Univ of Miami Ser B (MBIA Insd)................ 5.750 04/01/20 1,021,620
750 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC Insd).... 5.375 10/01/16 776,670
</Table>
See Notes to Financial Statements 17
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 140 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd).......................................... 5.950% 07/01/20 $ 146,616
1,000 Escambia Cnty, FL Util Auth Util Sys Rev (FGIC
Insd).......................................... 5.250 01/01/24 1,039,520
1,000 Florida Intergovnmtl Fin Ser C1 (AMBAC Insd)... 5.125 02/01/31 1,045,160
575 Florida Muni Ln Council Rev Ser B (MBIA
Insd).......................................... 5.750 11/01/14 624,508
1,185 Florida St Brd Ed Cap Outlay Pub Ed Ser C (FGIC
Insd).......................................... 5.000 06/01/23 1,248,670
1,250 Florida St Brd Ed Lottery Rev Ser A (FGIC
Insd).......................................... 6.000 07/01/12 1,365,350
1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC
Insd).......................................... 6.000 07/01/14 1,090,810
2,750 Florida St Brd Ed Lottery Rev Ser B (FGIC
Insd).......................................... 5.250 07/01/13 2,849,825
750 Florida St Brd of Regt Hsg Rev (MBIA Insd)..... 5.750 07/01/14 811,305
1,365 Florida St Correctional Privatization Commn Ctf
Partn (MBIA Insd).............................. 5.375 08/01/14 1,479,332
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 1,785,438
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 1,556,520
1,340 Gulf Breeze, FL Rev Loc Govt (FGIC Insd) (d)... 5.150 12/01/20 1,414,986
500 Gulf Breeze, FL Rev Loc Govt (Variable Rate
Coupon) (FGIC Insd)............................ 5.650 12/01/20 532,385
1,000 Indian River Cnty, FL Hosp Rev Rfdg (FSA
Insd).......................................... 6.100 10/01/18 1,021,840
1,750 Jea, FL Wtr & Swr Sys Rev Ser A (MBIA Insd).... 5.375 10/01/30 1,763,545
1,000 Key West, FL Util Brd Elec Rev Cap Apprec Ser D
(Escrowed to Maturity) (AMBAC Insd)............ * 10/01/13 745,380
1,000 Miami-Dade Cnty, FL Hlth Fac Miami Childrens
Hosp Ser A Rfdg (AMBAC Insd)................... 5.125 08/15/26 1,047,420
5,000 Miami-Dade Cnty, FL Pub Fac Rev Jackson Hlth
Sys Ser A (MBIA Insd).......................... 5.000 06/01/31 5,252,700
1,000 Orange Cnty, FL Sch Brd Ctf Partn Ser A (AMBAC
Insd).......................................... 5.250 08/01/14 1,085,620
1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive
Universal Blvd Rfdg (AMBAC Insd)............... 5.125 04/01/20 1,063,480
800 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd).......................................... 5.125 08/01/26 838,552
4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA
Insd).......................................... 5.000 08/01/21 4,208,360
4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA
Insd).......................................... 5.000 08/01/22 4,208,360
750 Polk Cnty, FL Sch Brd Ctf Partn Master Lease
Ser A (FSA Insd)............................... 5.500 01/01/16 809,693
1,000 Port Saint Lucie, FL Spl Assmt Rev Util Svc
Area No 3 & 4A (MBIA Insd)..................... 5.000 10/01/18 1,034,290
1,505 Reedy Creek, FL Impt Dist FL Util Ser 1 (AMBAC
Insd).......................................... 5.000 10/01/24 1,606,723
</Table>
18 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 535 Saint Johns Cnty, FL Indl Dev Auth Professional
Golf Proj Rfdg (MBIA Insd)..................... 5.250% 09/01/12 $ 579,721
1,000 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA
Insd).......................................... 5.000 07/01/21 1,051,420
3,245 Santa Rosa Bay Brdg Auth FL Rev Cap Apprec
(MBIA Insd).................................... * 07/01/18 1,997,590
4,000 Sunrise, FL Util Sys Rev Rfdg (AMBAC Insd)..... 5.200 10/01/22 4,482,880
10,000 Tallahassee, FL Hlth Fac Rev Tallahassee Mem
Regl Med Ser A Rfdg (MBIA Insd) (e)............ 6.625 12/01/13 10,047,300
2,500 Tampa Bay Wtr FL A Regl Wtr Supply Auth Util
Sys Rev Impt & Rfdg (FGIC Insd) (c)............ 4.500 10/01/36 2,481,675
2,610 University Cent FL Ctf Partn UCF Convocation
Corp Ser A (FGIC Insd) (a)..................... 5.000 10/01/26 2,764,225
2,740 University Cent FL Ctf Partn UCF Convocation
Corp Ser A (FGIC Insd) (a)..................... 5.000 10/01/27 2,899,797
1,000 Village Ctr Cmnty Dev Dist FL Ser A (MBIA
Insd).......................................... 5.200 11/01/25 1,063,520
3,735 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry
Riddle Ser B Rfdg (AMBAC Insd)................. 5.250 10/15/19 3,933,030
1,000 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry
Riddle Ser B Rfdg (AMBAC Insd)................. 5.250 10/15/22 1,049,330
--------------
77,423,441
--------------
GEORGIA 4.7%
3,460 Albany Dougherty, GA Inner City Auth Rev Albany
St Univ Student Hsg Ser A (XLCA Insd).......... 5.000 07/01/25 3,675,143
4,590 Bleckley-Cochran, GA Dev Auth Student Hsg Fac
Rev MGC Real Estate Fndtn Ser A
(CIFG Insd) (a)................................ 5.000 07/01/25 4,858,148
11,355 Bleckley-Cochran, GA Dev Auth Student Hsg Fac
Rev MGC Real Estate Fndtn Ser A
(CIFG Insd) (a)................................ 5.000 07/01/36 11,849,056
3,510 Douglasville-Douglas Cnty, GA Wtr & Swr Auth
Rev (MBIA Insd)................................ 5.000 06/01/27 3,725,830
14,530 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y
(AMBAC Insd)................................... 6.400 01/01/13 16,341,019
9,445 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y (MBIA
Insd).......................................... 6.500 01/01/17 11,157,945
160 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y
(Prerefunded @ 01/01/11) (AMBAC Insd).......... 6.400 01/01/13 177,779
145 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y
(Prerefunded @ 01/01/14) (MBIA Insd)........... 6.500 01/01/17 170,769
860 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed
to Maturity) (AMBAC Insd)...................... 6.400 01/01/13 969,160
410 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed
to Maturity) (MBIA Insd)....................... 6.500 01/01/17 501,118
--------------
53,425,967
--------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
ILLINOIS 13.9%
$ 1,005 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA
Insd).......................................... * 01/01/19 $ 597,372
2,845 Chicago, IL Brd Ed Cap Apprec Sch Reform B 1
(FGIC Insd).................................... * 12/01/19 1,626,543
1,500 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd).................................... * 12/01/19 857,580
1,020 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd).................................... * 12/01/25 436,213
2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA
Insd).......................................... 5.700% 01/01/25 2,205,320
2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA
Insd).......................................... 5.700 01/01/29 2,208,820
5,925 Chicago, IL Midway Arpt Rev Second Lien Ser B
Rfdg (AMBAC Insd) (a).......................... 5.000 01/01/21 6,305,563
6,220 Chicago, IL Midway Arpt Rev Second Lien Ser B
Rfdg (AMBAC Insd) (a).......................... 5.000 01/01/22 6,606,075
1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser A Rfdg (MBIA Insd).................... 5.000 01/01/29 1,047,790
2,840 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd) (a)................ 5.250 01/01/21 3,054,988
2,975 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd) (a)................ 5.250 01/01/22 3,194,406
3,120 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/23 3,344,016
1,430 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/24 1,530,829
5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.000 01/01/34 5,185,850
4,375 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
239-2 (Inverse Fltg) (Acquired 08/18/03, Cost
$5,125,313) (AMT) (b).......................... 11.229 01/01/20 6,170,150
5,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
239-3 (Inverse Fltg) (Acquired 08/18/03, Cost
$5,760,100) (AMT) (FSA Insd) (a) (b)........... 11.229 01/01/21 7,078,000
3,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
494-1 (Inverse Fltg) (Acquired 12/16/05, Cost
$3,736,860) (MBIA Insd) (b).................... 9.313 01/01/24 4,031,010
5,000 Chicago, IL Pk Dist Ser A (FGIC Insd).......... 5.000 01/01/31 5,274,350
615 Chicago, IL Pk Dist Ser C (FGIC Insd).......... 5.500 01/01/19 660,473
3,230 Chicago, IL Proj Ser A Rfdg (FGIC Insd)........ 5.375 01/01/34 3,367,017
1,305 Chicago, IL Proj Ser A Rfdg (MBIA Insd)........ 5.500 01/01/38 1,399,260
145 Chicago, IL Proj Ser A Rfdg (AMBAC Insd)....... 5.625 01/01/39 158,008
50 Chicago, IL Proj Ser A Rfdg (Prerefunded @
01/01/11) (MBIA Insd).......................... 5.500 01/01/38 54,258
290 Cook Cnty, IL Sch Dist No 100 Berwyn South Cap
Apprec (FSA Insd) (a).......................... 8.200 12/01/14 376,121
</Table>
20 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 345 Cook Cnty, IL Sch Dist No 100 Berwyn South Cap
Apprec (FSA Insd) (a).......................... 8.100% 12/01/16 $ 463,849
2,605 Cook Cnty, IL Sch Dist No 122 Oak Lawn Cap
Apprec (FGIC Insd) (a)......................... * 12/01/17 1,644,510
2,995 Cook Cnty, IL Sch Dist No 122 Oak Lawn Cap
Apprec (FGIC Insd) (a)......................... * 12/01/18 1,799,366
4,210 Cook Cnty, IL Sch Dist No 122 Oak Lawn Cap
Apprec (FGIC Insd) (a)......................... * 12/01/19 2,406,941
4,050 Cook Cnty, IL Sch Dist No 122 Oak Lawn Cap
Apprec (FGIC Insd)............................. * 12/01/20 2,203,889
3,000 Du Page Cnty, IL Cmnty High Sch (FSA Insd)..... 5.600 01/01/22 3,281,880
540 Grundy, Kendall & Will Cntys, IL (AMBAC
Insd).......................................... 5.500 05/01/20 577,249
340 Grundy, Kendall & Will Cntys, IL (AMBAC
Insd).......................................... 5.500 05/01/21 362,056
2,000 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford
Sch 205 (FSA Insd)............................. 6.650 02/01/11 2,240,580
5,025 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford
Sch 205 (FSA Insd)............................. 6.650 02/01/12 5,075,652
4,800 Illinois Fin Auth Rev Swedish American Hosp
(AMBAC Insd)................................... 5.000 11/15/31 4,999,776
2,000 Illinois Med Dist (MBIA Insd).................. 5.250 06/01/32 2,120,420
3,500 Illinois Muni Elec Agy Pwr Supply Sys Rev Rfdg
(FSA Insd)..................................... 5.000 02/01/21 3,589,495
10,000 Illinois St Toll Hwy Auth Toll Highway Rev Sr
Priority Ser A-1 (FSA Insd).................... 5.000 01/01/26 10,679,700
1,200 Lake Cnty, IL Cmnty Cons Sch Dist No 50
Woodland Cap Apprec Ser B (FGIC Insd).......... * 12/01/14 871,812
6,790 Lake Cnty, IL Cmnty Unit Sch Dist No 60
Waukegan Cap Apprec Ser A (FSA Insd)........... * 12/01/17 4,286,459
3,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No
158 Cap Apprec (FGIC Insd)..................... * 01/01/17 1,966,710
4,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No
158 Cap Apprec (FGIC Insd)..................... * 01/01/18 2,497,160
1,330 McHenry Cnty, IL Cmnty High Sch Dist No 154 Cap
Apprec (FGIC Insd)............................. * 01/01/16 913,511
6,000 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev McCormick Pl Expn Ser A (MBIA Insd).... 5.250 06/15/42 6,421,620
500 Southern IL Univ Rev Cap Apprec Hsg & Aux Ser A
(MBIA Insd).................................... * 04/01/20 279,245
5,245 University IL Univ Rev Aux Fac Sys (MBIA Insd)
(c)............................................ 4.500 04/01/36 5,181,640
11,020 University IL Univ Rev Aux Fac Sys (MBIA Insd)
(c)............................................ 5.000 04/01/26 11,727,264
8,910 University IL Univ Rev Aux Fac Sys (MBIA Insd)
(c)............................................ 5.000 04/01/27 9,460,282
6,415 Will Cnty, IL Sch Dist No 086 Joliet Ser B Rfdg
(FSA Insd)..................................... 5.000 03/01/23 6,854,492
--------------
158,675,570
--------------
</Table>
See Notes to Financial Statements 21
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
INDIANA 3.2%
$ 5,810 Indiana Bd Bk Rev Spl Pgm Ser B1 (FSA Insd)
(a)............................................ 5.000% 03/01/27 $ 6,170,743
870 Indiana Bd Bk Spl Pgm Ser A (Escrowed to
Maturity) (AMBAC Insd)......................... 9.750 08/01/09 948,953
6,745 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty Proj
Ser A (AMBAC Insd)............................. 5.000 05/01/35 7,034,023
2,335 Lake Cnty, IN Bldg Corp First Mtg (MBIA Insd)
(a)............................................ 5.750 08/01/11 2,513,371
1,550 Marion Cnty, IN Convention & Rec Lease Rent Ser
A Rfdg (AMBAC Insd)............................ 5.000 06/01/21 1,632,941
1,655 Plainfield, IN Cmnty High Sch Bldg Corp First
Mgt (FGIC Insd)................................ 5.000 07/15/27 1,756,567
2,555 Plainfield, IN Cmnty High Sch Bldg Corp First
Mtg (FGIC Insd)................................ 5.000 07/15/28 2,703,727
800 Plainfield, IN Cmnty High Sch Bldg Corp First
Mtg (FGIC Insd)................................ 5.000 01/15/30 844,680
1,900 South Harrison, IN 2000 Sch Bldg Corp Ser A
(FSA Insd)..................................... 5.250 01/15/25 2,057,073
5,780 Wawasee Cmnty Sch Corp IN New Elem & Remodeling
Bldg Corp First Mtg Rfdg (FSA Insd) (a)........ 5.000 07/15/24 6,225,811
4,900 Wayne Twp, IN Marion Cnty Sch First Mtg Rfdg
(FGIC Insd).................................... 5.000 07/15/27 5,251,673
--------------
37,139,562
--------------
IOWA 0.2%
2,375 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)................................ 5.750 07/01/17 2,452,734
--------------
LOUISIANA 2.4%
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 4,377,802
5,530 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev
Lake Charles Mem Hosp Proj Ser A (Connie Lee
Insd).......................................... 6.500 12/01/18 6,734,987
7,500 Lafayette, LA Util Rev (MBIA Insd)............. 5.250 11/01/24 8,158,350
655 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/16 711,625
2,035 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd) (a)........................... 5.375 12/01/17 2,198,716
2,150 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd) (a)........................... 5.375 12/01/18 2,322,968
1,415 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/19 1,528,837
</Table>
22 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
LOUISIANA (CONTINUED)
$ 1,200 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375% 12/01/20 $ 1,296,540
320 New Orleans, LA Home Mtg Auth Single Family Mtg
Rev 1985 Ser A (MBIA Insd)..................... * 09/15/16 113,542
--------------
27,443,367
--------------
MASSACHUSETTS 0.3%
2,700 Massachusetts Muni Whsl Elec Co Nuclear Mix 1-A
(MBIA Insd).................................... 5.250 07/01/13 2,927,070
175 Massachusetts Muni Whsl Elec Co Proj No 6-A
(MBIA Insd).................................... 5.250 07/01/16 189,280
--------------
3,116,350
--------------
MICHIGAN 0.6%
75 Chippewa Valley, MI Sch Bldg & Site (FSA
Insd).......................................... 5.000 05/01/20 80,601
1,400 Huron, MI Sch Dist (FSA Insd).................. 5.250 05/01/21 1,486,814
2,675 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg
(FGIC Insd).................................... 5.375 12/01/17 2,894,778
2,840 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg
(FGIC Insd).................................... 5.375 12/01/20 3,073,334
--------------
7,535,527
--------------
MISSISSIPPI 0.6%
1,000 Harrison Cnty, MS Wastewtr Mgmt & Solid
Wastewtr Treatment Fac Ser A Rfdg (FGIC
Insd).......................................... 8.500 02/01/13 1,258,300
5,000 Mississippi Dev Bank Spl Oblg Muni Energy Agy
Pwr Supply Proj Ser A (XLCA Insd).............. 5.000 03/01/41 5,207,650
--------------
6,465,950
--------------
MISSOURI 1.2%
1,170 Mehlville, MO Sch Dist No R-9 Ctf Partn Ser A
(FSA Insd)..................................... 5.500 03/01/16 1,256,627
1,225 Mehlville, MO Sch Dist No R-9 Ctf Partn Ser A
(FSA Insd)..................................... 5.500 03/01/17 1,310,799
840 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A
(MBIA Insd).................................... 5.375 07/01/17 904,840
10,000 Springfield, MO Pub Util Rev (FGIC Insd)....... 4.500 08/01/36 9,926,300
--------------
13,398,566
--------------
MONTANA 0.3%
3,400 Forsyth, MT Pollutn Ctl Rev Northwestern Corp
Colstrip Rfdg (AMBAC Insd)..................... 4.650 08/01/23 3,481,566
--------------
NEBRASKA 1.0%
7,000 Nebraska Pub Pwr Dist Rev Gen Ser A (FGIC Insd)
(c)............................................ 5.000 01/01/41 7,329,560
3,620 Saunders Cnty, NE (FSA Insd) (a)............... 5.000 11/01/35 3,724,292
--------------
11,053,852
--------------
</Table>
See Notes to Financial Statements 23
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
NEVADA 1.5%
$ 5,020 Clark Cnty, NV Arpt Rev Rols RR II 292-3
(Inverse Fltg) (Acquired 07/30/04, Cost
$5,493,386) (AMT) (FGIC Insd) (b).............. 7.114% 07/01/22 $ 5,882,536
10,000 Director St, NV Dept Business & Ind Las Vegas
Monorail Proj First Tier (AMBAC Insd).......... 5.625 01/01/32 10,704,700
935 Reno, NV Cap Impt Rev (FGIC Insd).............. 5.125 06/01/26 985,911
--------------
17,573,147
--------------
NEW HAMPSHIRE 0.2%
2,500 New Hampshire St Tpk Sys Rev Ser C Rfdg
(Inverse Fltg) (FGIC Insd)..................... 10.193 11/01/17 2,613,125
--------------
NEW JERSEY 0.6%
3,350 New Jersey Econ Dev Auth Rev Mtr Veh Sur Rev
Ser A (MBIA Insd).............................. 5.000 07/01/23 3,547,215
2,760 Newark, NJ Hsg Auth Port Auth Newark Marine
Term (MBIA Insd)............................... 5.500 01/01/28 3,040,223
--------------
6,587,438
--------------
NEW MEXICO 0.5%
5,440 New Mexico Fin Auth Rev Sub Lien Pub Proj
Revolving Fd C (MBIA Insd) (a) (c)............. 4.750 06/15/26 5,630,128
--------------
NEW YORK 1.3%
5,000 Long Island Pwr Auth NY Gen Ser A (XLCA
Insd).......................................... 5.000 12/01/26 5,317,000
5,470 New York City Hlth & Hosp Hlth Sys Ser A (FSA
Insd).......................................... 5.000 02/15/21 5,750,994
3,105 New York St Dorm Auth Rev Insd Brooklyn Law Sch
Ser B (XLCA Insd) (a).......................... 5.375 07/01/21 3,410,253
--------------
14,478,247
--------------
NORTH CAROLINA 1.2%
10,000 North Carolina Muni Pwr Agy Ser A (MBIA
Insd).......................................... 5.250 01/01/18 10,779,800
2,735 North Carolina Muni Pwr Agy Ser A (MBIA
Insd).......................................... 5.250 01/01/19 2,948,275
--------------
13,728,075
--------------
NORTH DAKOTA 1.0%
5,000 Mercer Cnty, ND Pollutn Ctl Rev Antelope Vly
Station Rfdg (AMBAC Insd)...................... 7.200 06/30/13 5,766,550
5,000 Oliver Cnty, ND Pollutn Ctl Rev Square Butte
Elec Coop Ser A Rfdg (AMBAC Insd).............. 5.300 01/01/27 5,240,650
--------------
11,007,200
--------------
OHIO 0.6%
1,000 Chillicothe, OH City Sch Dist Sch Impt (FGIC
Insd).......................................... 5.250 12/01/26 1,092,180
5,000 Columbus, OH City Sch Dist Sch Fac Constr &
Impt (FSA Insd)................................ 5.250 12/01/27 5,539,050
--------------
6,631,230
--------------
</Table>
24 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
OKLAHOMA 2.3%
$ 2,340 Claremore, OK Pub Wk Auth Util Sys Rev Rfdg
(FSA Insd) (a)................................. 5.000% 07/01/25 $ 2,481,523
2,890 Jenks, OK Aquarium Auth Rev Rfdg (MBIA Insd)... 5.250 07/01/19 3,168,163
1,480 Jenks, OK Aquarium Auth Rev Rfdg (MBIA Insd)... 5.250 07/01/33 1,599,214
4,320 McAlester, OK Pub Wks Auth Util Cap Apprec Ser
A (FSA Insd)................................... * 02/01/30 1,212,581
2,020 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser A
(FSA Insd)..................................... 5.000 07/01/17 2,103,628
2,400 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev
(FGIC Insd).................................... 5.250 10/01/29 2,599,512
2,000 Oklahoma Colleges Brd Regt Stad Univ Cent OK
Ser B (AMBAC Insd)............................. 5.500 06/01/24 2,214,500
2,000 Tulsa, OK Cmnty College Rev (AMBAC Insd)....... 5.500 07/01/22 2,191,280
8,260 Tulsa, OK Tulsa Indl Auth Rev Univ Tulsa Ser A
(MBIA Insd).................................... 5.375 10/01/31 8,723,469
--------------
26,293,870
--------------
OREGON 0.3%
2,835 Oregon St Dept Admin Ser B Rfdg (MBIA Insd).... 5.250 05/01/17 3,037,929
--------------
PENNSYLVANIA 3.3%
5,000 Allegheny Cnty, PA Hosp Dev Auth Rev Insd Hlth
Sys Ser A (MBIA Insd).......................... 6.500 11/15/30 5,593,550
4,875 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (Escrowed to Maturity)
(AMBAC Insd)................................... 5.625 08/15/26 5,328,619
3,000 Harrisburg, PA Auth Res Gtd Sub Ser D-2
(Variable Rate Coupon) (FSA Insd).............. 5.000 12/01/33 3,208,050
3,000 Lycoming Cnty, PA Auth College Rev PA College
of Technology (AMBAC Insd)..................... 5.350 07/01/26 3,171,030
1,375 Pennsylvania St Higher Ed Fac Auth Rev St Sys
Higher Ed Ser P (AMBAC Insd)................... 5.000 12/15/16 1,404,068
2,990 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance
4th Ser (FSA Insd)............................. 5.250 08/01/18 3,216,911
4,555 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance
4th Ser (FSA Insd)............................. 5.250 08/01/21 4,885,465
1,485 Philadelphia, PA Gas Wks Rev Eighteenth Ser
(AGL).......................................... 5.250 08/01/20 1,605,137
3,665 Philadelphia, PA Gas Wks Rev Fifth Ser A-1
(AGL) (a)...................................... 5.250 09/01/17 3,983,672
5,000 State Pub Sch Bldg Auth PA Sch Lease
Philadelphia Sch Dist Proj (FSA Insd).......... 5.250 06/01/26 5,356,500
--------------
37,753,002
--------------
SOUTH CAROLINA 2.6%
3,325 Columbia, SC Pkg Fac Rev Ser A (CIFG Insd)..... 5.000 02/01/37 3,468,707
5,170 Easley, SC Util Rev Impt & Rfdg (FSA Insd)..... 5.000 12/01/34 5,431,602
</Table>
See Notes to Financial Statements 25
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
SOUTH CAROLINA (CONTINUED)
$ 3,000 Kershaw Cnty, SC Pub Schs Fndtn Installment Pwr
Rev Dist Proj (CIFG Insd)...................... 5.000% 12/01/30 $ 3,154,950
3,000 Kershaw Cnty, SC Pub Schs Fndtn Installment Pwr
Rev Dist Proj (CIFG Insd)...................... 5.000 12/01/31 3,152,430
3,800 Scago Ed & Fac Corp for Cherokee Cnty SC Proj
Ser B (FSA Insd)............................... 5.000 12/01/30 4,009,988
6,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec
& Gas Co Proj Ser A (AMBAC Insd)............... 5.200 11/01/27 6,913,985
4,000 South Carolina Jobs Econ Tuomey (CIFG Insd).... 5.000 11/01/30 4,200,320
--------------
30,331,982
--------------
SOUTH DAKOTA 1.1%
1,455 Rapid City, SD Sales Tax Rev Rfdg (AMBAC
Insd).......................................... 5.500 06/01/12 1,574,790
5,205 South Dakota St Lease Rev Tr Ctf Ser A (FSA
Insd).......................................... 6.625 09/01/12 5,856,770
4,000 South Dakota St Lease Rev Tr Ctf Ser A (FSA
Insd).......................................... 6.700 09/01/17 4,952,800
--------------
12,384,360
--------------
TENNESSEE 0.2%
3,000 White House Util Dist TN Impt & Rfdg (MBIA
Insd) (c)...................................... 4.250 01/01/32 2,906,250
--------------
TEXAS 6.3%
1,165 Alamo, TX Cmnty College Dist Combined Fee Rfdg
(FSA Insd)..................................... 5.000 11/01/22 1,222,493
5,000 Brazos Riv Auth TX Rev Houston Ind Inc Proj Ser
C (Variable Rate Coupon) (AMBAC Insd).......... 5.125 05/01/19 5,190,900
1,900 Colorado Riv, TX Muni Wtr Dist Sys Rfdg (AMBAC
Insd).......................................... 5.375 01/01/19 2,064,559
3,055 Dallas Fort Worth, TX Intl Arpt Rols RR II
291-1 (Inverse Fltg) (Acquired 07/19/04, Cost
$3,448,667) (AMT) (FSA Insd) (a) (b)........... 7.113 11/01/19 3,621,030
2,000 Dallas Fort Worth, TX Intl Arpt Rols RR II
291-2 (Inverse Fltg) (Acquired 07/19/04, Cost
$2,164,480) (AMT) (FSA Insd) (a) (b)........... 6.859 11/01/21 2,321,940
22,500 Houston, TX Util Sys Rev First Lien Ser A Rfdg
(FGIC Insd).................................... 5.250 05/15/23 24,378,300
1,790 Laredo, TX Cmnty College Dist Combined Fee Rev
Bldg Rfdg (AMBAC Insd)......................... 5.300 08/01/26 1,878,838
3,265 North Harris Cnty, TX Regl Wtr Sr Lien (MBIA
Insd) (a)...................................... 5.000 12/15/29 3,420,349
3,000 Nueces Riv Auth TX Wtr Supply Rev Fac Corpus
Christi Proj Rfdg (FSA Insd)................... 5.000 07/15/25 3,178,170
2,000 Nueces Riv Auth TX Wtr Supply Rev Fac Corpus
Christi Proj Rfdg (FSA Insd)................... 5.000 03/01/27 2,111,240
2,220 Raven Hills, TX Higher Ed Corp Cardinal Vlg Llc
Lamar Univ A (Prerefunded @ 08/01/13) (MBIA
Insd).......................................... 5.500 08/01/28 2,463,911
</Table>
26 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$ 2,000 San Antonio, TX Hotel Occupancy Rev Sub Lien
Ser A Rfdg (AMBAC Insd)........................ 5.000% 08/15/29 $ 2,076,680
1,750 Tarrant Cnty, TX Hlth Fac Dev Corp Hlth Sys Rev
Ser B (Escrowed to Maturity) (FGIC Insd)....... 5.000 09/01/15 1,890,000
1,060 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA
Insd).......................................... 5.250 03/01/18 1,144,630
2,000 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA
Insd).......................................... 5.250 03/01/20 2,159,680
10,000 Texas St Tpk Auth Cent TX Tpk First Tier Ser A
(AMBAC Insd)................................... 5.500 08/15/39 10,832,700
1,800 Tyler, TX Indpt Sch Dist (FSA Insd) (a)........ 5.000 02/15/27 1,898,784
--------------
71,854,204
--------------
UTAH 0.3%
2,140 Murray City, UT Swr & Wtr Rev (AMBAC Insd)..... 5.250 10/01/23 2,318,326
560 Provo, UT Elec Rev 1984 Ser A Rfdg (Escrowed to
Maturity) (AMBAC Insd)......................... 10.375 09/15/15 734,530
--------------
3,052,856
--------------
WASHINGTON 9.1%
4,115 Chelan Cnty, WA Sch Dist No 246 (FSA Insd)..... 5.000 12/01/21 4,354,946
11,340 Energy Northwest WA Elec Rev Columbia
Generating Ser A Rfdg (FSA Insd)............... 5.500 07/01/17 12,288,818
4,500 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (FSA Insd)................................ 5.500 07/01/17 4,876,515
14,500 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (FSA Insd)................................ 5.500 07/01/18 15,713,215
5,000 Energy Northwest WA Elec Rev Proj No 3 Ser B
Rfdg (FSA Insd)................................ 6.000 07/01/16 5,612,950
1,365 Energy Northwest WA Wind Proj (AMBAC Insd)..... 5.000 07/01/23 1,427,694
5,540 Everett, WA Wtr & Swr Rev (MBIA Insd).......... 5.000 12/01/29 5,859,049
1,215 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)......... 5.000 04/01/24 1,279,820
1,160 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)......... 5.000 04/01/29 1,215,030
1,895 Fife, WA Wtr & Swr Rev (MBIA Insd)............. 5.125 04/01/24 1,906,976
2,500 Goat Hill Ppty WA Lease Rev Govt Office Bldg
Proj (MBIA Insd)............................... 5.000 12/01/33 2,602,750
1,025 Grant Cnty, WA Pub Util Dist No 2 Rev Second
Ser C Rfdg (AMBAC Insd) (a).................... 6.000 01/01/17 1,041,103
8,160 Klickitat Cnty, WA Pub Util Dist 001 Elec Rev
Ser B Rfdg (FGIC Insd) (a)..................... 5.000 12/01/26 8,698,886
5,115 Lynnwood, WA Pub Fac Dist Rev Convention Ctr
(AMBAC Insd)................................... 5.000 12/01/34 5,346,658
4,185 Port Seattle, WA Rev Intermediate Lien Rfdg
(XLCA Insd).................................... 5.000 02/01/27 4,432,919
8,220 Port Seattle, WA Rev Intermediate Lien Rfdg
(XLCA Insd).................................... 5.000 02/01/28 8,687,471
2,000 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA
Insd).......................................... 5.500 03/01/18 2,135,880
2,565 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.500 12/01/23 2,792,464
145 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.000 12/01/24 151,441
</Table>
See Notes to Financial Statements 27
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
WASHINGTON (CONTINUED)
$ 3,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.250% 09/01/33 $ 3,188,370
2,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/25 2,226,780
2,420 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/26 2,691,209
1,465 Tacoma, WA Solid Waste Util Rev Rfdg
(Prerefunded @ 12/01/11) (AMBAC Insd).......... 5.375 12/01/18 1,589,877
2,075 Tacoma, WA Solid Waste Util Rev Rfdg
(Prerefunded @ 12/01/11) (AMBAC Insd) (a)...... 5.375 12/01/19 2,251,873
1,600 Washington St Ser R 99A Rfdg (FGIC Insd)....... 5.000 01/01/17 1,642,608
--------------
104,015,302
--------------
WEST VIRGINIA 0.1%
1,530 West Virginia Econ Dev Auth Lease Rev
Correctional Juvenile & Pub-A (MBIA Insd)...... 5.500 06/01/19 1,678,379
--------------
WISCONSIN 0.8%
1,350 Plover, WI Wtr Sys Rev (AMBAC Insd) (a)........ 5.400 12/01/16 1,418,688
1,500 Plover, WI Wtr Sys Rev (AMBAC Insd) (a)........ 5.500 12/01/18 1,580,715
1,405 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)
(a)............................................ 5.250 09/01/16 1,504,095
750 Wilmot, WI Un High Sch Dist Ser B Rfdg (FSA
Insd).......................................... 5.000 03/01/23 809,070
4,000 Wisconsin Pub Pwr Inc Sys Pwr Supply Sys Rev
Ser A (AMBAC Insd)............................. 5.000 07/01/37 4,191,840
--------------
9,504,408
--------------
PUERTO RICO 0.3%
3,000 Puerto Rico Indl Tourist Ed Med & Environmental
Ctl Fac Hosp Aux (MBIA Insd)................... 6.250 07/01/16 3,020,100
--------------
TOTAL LONG-TERM INVESTMENTS 97.4%
(Cost $1,055,660,190)........................................................ 1,113,280,093
--------------
SHORT-TERM INVESTMENTS 5.8%
5,400 Atlanta, GA Wtr & Wastewtr Rev Ser C (FSA Insd)
(f)............................................ 3.850 11/01/41 5,400,000
10,945 Bell Cnty, TX Hlth Fac Dev Corp Rev Hosp Scott
& White 2001 Ser 2 (MBIA Insd) (f)............. 3.890 08/15/31 10,945,000
8,200 Blount Cnty, TN Pub Bldg Auth Loc Govt Pub Impt
Ser D 5 B (XLCA Insd) (a)(f)................... 3.800 06/01/22 8,200,000
11,200 Detroit, MI Swr Disp Rev Sr Lien Ser B (FSA
Insd) (f)...................................... 3.850 07/01/33 11,200,000
2,700 Illinois Hlth Fac Auth Rev Univ Chicago Hosp
(MBIA Insd) (f)................................ 3.890 08/01/26 2,700,000
15,500 Pinellas Cnty, FL Hlth Fac Pooled Hosp Ln Pgm
Rfdg (AMBAC Insd) (f).......................... 3.850 12/01/15 15,500,000
8,000 Sevier Cnty, TN Pub Bldg Auth Loc Govt Pub Impt
Ser VI D3 (AMBAC Insd) (f)..................... 3.800 06/01/33 8,000,000
</Table>
28 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONTINUED)
$ 1,100 University Toledo, OH Gen Rcpt (FGIC Insd)
(f)............................................ 3.850% 06/01/32 $ 1,100,000
2,800 Wisconsin St Hlth & Ed Fac Auth Rev Gundersen
Lutheran Ser B (FGIC Insd) (f)................. 3.840 05/01/33 2,800,000
--------------
TOTAL SHORT-TERM INVESTMENTS 5.8%
(Cost $65,845,000)........................................................... 65,845,000
--------------
TOTAL INVESTMENTS 103.2%
(Cost $1,121,505,190)........................................................ 1,179,125,093
LIABILITIES IN EXCESS OF OTHER ASSETS (3.2%).................................. (36,521,131)
--------------
NET ASSETS 100.0%............................................................. $1,142,603,962
==============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) The Fund owns 100% of the outstanding bond issuance.
(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 3.1% of net
assets.
(c) Securities purchased on a when-issued or delayed delivery basis.
(d) Security converts to a fixed coupon rate at a predetermined date.
(e) All or a portion of this security has been physically segregated in
connection with open futures and swap contracts.
(f) Security includes a put feature allowing the Fund to periodically put the
security back to the issuer at amortized cost on specified put dates. The
interest rate shown represents the current interest rate earned by the Fund
based on the most recent reset date.
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 29
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
FUTURES CONTRACTS OUTSTANDING AS OF SEPTEMBER 30, 2006:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures December 2006 (Current
Notional Value of $108,063 per contract).................. 890 $(958,483)
</Table>
SWAP AGREEMENT OUTSTANDING AS OF SEPTEMBER 30, 2006:
INTEREST RATE SWAPS
<Table>
<Caption>
PAY/
RECEIVE NOTIONAL UNREALIZED
FLOATING RATE FLOATING FIXED EXPIRATION AMOUNT APPRECIATION/
COUNTERPARTY INDEX RATE RATE DATE (000) DEPRECIATION
JP Morgan Chase Bank N.A. USD-BMA
Municipal Swap
Index........... Receive 4.096% 12/15/26 $71,900 $(926,662)
</Table>
30 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2006
<Table>
ASSETS:
Total Investments (Cost $1,121,505,190)..................... $1,179,125,093
Cash........................................................ 1,685,244
Receivables:
Interest.................................................. 13,962,138
Investments Sold.......................................... 1,297,148
Fund Shares Sold.......................................... 500,748
Variation Margin on Futures............................... 83,437
Other....................................................... 301,181
--------------
Total Assets............................................ 1,196,954,989
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 49,356,004
Fund Shares Repurchased................................... 1,803,581
Income Distributions...................................... 813,068
Investment Advisory Fee................................... 476,501
Distributor and Affiliates................................ 359,852
Swap Contracts.............................................. 926,662
Trustees' Deferred Compensation and Retirement Plans........ 369,928
Accrued Expenses............................................ 245,431
--------------
Total Liabilities....................................... 54,351,027
--------------
NET ASSETS.................................................. $1,142,603,962
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,080,807,166
Net Unrealized Appreciation................................. 55,734,758
Accumulated Net Realized Gain............................... 5,001,190
Accumulated Undistributed Net Investment Income............. 1,060,848
--------------
NET ASSETS.................................................. $1,142,603,962
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,075,890,764 and 57,872,850 shares of
beneficial interest issued and outstanding)............. $ 18.59
Maximum sales charge (4.75%* of offering price)......... .93
--------------
Maximum offering price to public........................ $ 19.52
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $43,023,552 and 2,317,026 shares of
beneficial interest issued and outstanding)............. $ 18.57
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $21,255,010 and 1,145,748 shares of
beneficial interest issued and outstanding)............. $ 18.55
==============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $2,434,636 and 130,966 shares of
beneficial interest issued and outstanding)............. $ 18.59
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 31
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended September 30, 2006
<Table>
INVESTMENT INCOME:
Interest.................................................... $54,856,810
-----------
EXPENSES:
Investment Advisory Fee..................................... 5,871,569
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B, and C of $2,647,401, $498,684, and $217,789,
respectively)............................................. 3,363,874
Shareholder Services........................................ 691,987
Legal....................................................... 79,880
Custody..................................................... 72,940
Trustees' Fees and Related Expenses......................... 46,285
Other....................................................... 556,770
-----------
Total Expenses.......................................... 10,683,305
Less Credits Earned on Cash Balances.................... 57,640
-----------
Net Expenses............................................ 10,625,665
-----------
NET INVESTMENT INCOME....................................... $44,231,145
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 5,927,404
Futures................................................... 5,316,471
Swaps..................................................... (1,329,464)
-----------
Net Realized Gain........................................... 9,914,411
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 60,107,152
-----------
End of the Period:
Investments............................................. 57,619,903
Swaps................................................... (926,662)
Futures................................................. (958,483)
-----------
55,734,758
-----------
Net Unrealized Depreciation During the Period............... (4,372,394)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,542,017
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $49,773,162
===========
</Table>
32 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
----------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 44,231,145 $ 45,435,392
Net Realized Gain.................................. 9,914,411 18,143,294
Net Unrealized Depreciation During the Period...... (4,372,394) (18,879,056)
-------------- --------------
Change in Net Assets from Operations............... 49,773,162 44,699,630
-------------- --------------
Distributions from Net Investment Income:
Class A Shares................................... (41,491,407) (43,893,696)
Class B Shares................................... (1,533,329) (1,921,231)
Class C Shares................................... (670,641) (636,583)
Class I Shares................................... (78,466) (9,817)
-------------- --------------
(43,773,843) (46,461,327)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares................................... (22,486,062) (10,259,399)
Class B Shares................................... (1,089,279) (577,204)
Class C Shares................................... (456,473) (180,088)
Class I Shares................................... (37,990) -0-
-------------- --------------
(24,069,804) (11,016,691)
-------------- --------------
Total Distributions................................ (67,843,647) (57,478,018)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... (18,070,485) (12,778,388)
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......................... 74,704,286 76,930,648
Net Asset Value of Shares Issued Through Dividend
Reinvestment..................................... 54,158,045 44,697,062
Cost of Shares Repurchased......................... (162,232,377) (138,280,579)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... (33,370,046) (16,652,869)
-------------- --------------
TOTAL DECREASE IN NET ASSETS....................... (51,440,531) (29,431,257)
NET ASSETS:
Beginning of the Period............................ 1,194,044,493 1,223,475,750
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of $1,060,848
and $772,068, respectively)...................... $1,142,603,962 $1,194,044,493
============== ==============
</Table>
See Notes to Financial Statements 33
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS A SHARES -----------------------------------------------------
2006 2005 2004 2003 2002
-----------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $ 18.87 $ 19.07 $ 19.27 $ 19.65 $ 19.22
-------- -------- -------- -------- --------
Net Investment Income................... .72(a) .72 .76 .77 .81
Net Realized and Unrealized Gain/Loss... .09 (.01) .02 (.23) .87
-------- -------- -------- -------- --------
Total from Investment Operations.......... .81 .71 .78 .54 1.68
-------- -------- -------- -------- --------
Less:
Distributions from Net Investment
Income................................ .71 .74 .75 .74 .81
Distributions from Net Realized Gain.... .38 .17 .23 .18 .44
-------- -------- -------- -------- --------
Total Distributions....................... 1.09 .91 .98 .92 1.25
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD........ $ 18.59 $ 18.87 $ 19.07 $ 19.27 $ 19.65
======== ======== ======== ======== ========
Total Return (b).......................... 4.49% 3.77% 4.22% 2.90% 9.28%
Net Assets at End of the Period (In
millions)............................... $1,075.9 $1,114.2 $1,137.2 $1,209.9 $1,244.3
Ratio of Expenses to Average Net Assets... .88% .88% .87% .86% .87%
Ratio of Net Investment Income to Average
Net Assets.............................. 3.87% 3.81% 3.99% 4.02% 4.30%
Portfolio Turnover........................ 48% 66% 40% 61% 54%
</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 or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months 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.
34 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS B SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $18.85 $19.05 $19.24 $19.63 $19.20
------ ------ ------ ------ ------
Net Investment Income...................... .58(a) .59 .62 .63 .66
Net Realized and Unrealized Gain/Loss...... .09 (.02) .02 (.24) .88
------ ------ ------ ------ ------
Total from Investment Operations............. .67 .57 .64 .39 1.54
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .57 .60 .60 .60 .67
Distributions from Net Realized Gain....... .38 .17 .23 .18 .44
------ ------ ------ ------ ------
Total Distributions.......................... .95 .77 .83 .78 1.11
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $18.57 $18.85 $19.05 $19.24 $19.63
====== ====== ====== ====== ======
Total Return (b)............................. 3.71% 3.04% 3.43% 2.08% 8.47%
Net Assets at End of the Period (In
millions).................................. $ 43.0 $ 56.2 $ 66.4 $ 82.6 $ 87.2
Ratio of Expenses to Average Net Assets...... 1.63% 1.64% 1.63% 1.62% 1.63%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.11% 3.05% 3.23% 3.26% 3.53%
Portfolio Turnover........................... 48% 66% 40% 61% 54%
</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.
See Notes to Financial Statements 35
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS C SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $18.84 $19.04 $19.23 $19.62 $19.19
------ ------ ------ ------ ------
Net Investment Income...................... .58(a) .58 .62 .63 .67
Net Realized and Unrealized Gain/Loss...... .08 (.01) .02 (.24) .87
------ ------ ------ ------ ------
Total from Investment Operations............. .66 .57 .64 .39 1.54
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .57 .60 .60 .60 .67
Distributions from Net Realized Gain....... .38 .17 .23 .18 .44
------ ------ ------ ------ ------
Total Distributions.......................... .95 .77 .83 .78 1.11
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $18.55 $18.84 $19.04 $19.23 $19.62
====== ====== ====== ====== ======
Total Return (b)............................. 3.66% 3.04% 3.43% 2.08% 8.48%
Net Assets at End of the Period (In
millions).................................. $ 21.3 $ 21.7 $ 19.9 $ 24.1 $ 22.1
Ratio of Expenses to Average Net Assets...... 1.63% 1.64% 1.63% 1.62% 1.63%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.11% 3.05% 3.23% 3.25% 3.53%
Portfolio Turnover........................... 48% 66% 40% 61% 54%
</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.
36 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
AUGUST 12, 2005
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
CLASS I SHARES SEPTEMBER 30, SEPTEMBER 30,
2006 2005
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................ $18.87 $18.93
------ ------
Net Investment Income................................. .75(a) .10
Net Realized and Unrealized Gain/Loss................. .10 (.06)
------ ------
Total from Investment Operations........................ .85 .04
------ ------
Less:
Distributions from Net Investment Income.............. .75 .10
Distributions from Net Realized Gain.................. .38 -0-
------ ------
Total Distributions..................................... 1.13 .10
------ ------
NET ASSET VALUE, END OF THE PERIOD...................... $18.59 $18.87
====== ======
Total Return (b)........................................ 4.75% .20%*
Net Assets at End of the Period (In millions)........... $ 2.4 $ 1.9
Ratio of Expenses to Average Net Assets................. .63% .64%
Ratio of Net Investment Income to Average Net Assets.... 4.11% 4.06%
Portfolio Turnover...................................... 48% 66%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. This return does
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 37
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006
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 Fund offers Class A
Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares
differs by its initial sales load, contingent deferred sales charges, the
allocation of class-specific expenses and voting rights on matters affecting a
single class.
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. Interest rate swaps are valued using market
quotations from brokers. 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 September 30, 2006, the Fund had $49,356,004 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
38
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At September 30, 2006, the cost and related gross unrealized appreciation
and depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $1,120,657,263
==============
Gross tax unrealized appreciation........................... $ 58,510,653
Gross tax unrealized depreciation........................... (42,823)
--------------
Net tax unrealized appreciation on investments.............. $ 58,467,830
==============
</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 years ended September 30,
2006 and 2005 was as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $ 5,594,196 $ 1,834,335
Tax-exempt income......................................... 43,813,499 46,489,249
Long-term capital gain.................................... 18,477,514 9,269,523
----------- -----------
$67,885,209 $57,593,107
=========== ===========
</Table>
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities. A permanent difference relating to book to tax
accretion differences totaling $114,771 was reclassified from accumulated
undistributed net investment income to accumulated net realized gain.
Additionally, a permanent difference relating to the Fund's investments in other
regulated investment companies totaling $9,951 was reclassified from accumulated
undistributed net investment income to accumulated net realized gain. A
permanent book to tax difference of $6,200 was reclassed from accumulated net
investment income to capital.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 362,927
Undistributed tax-exempt income............................. 1,719,881
Undistributed long-term capital gain........................ 3,333,429
</Table>
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of gains or losses recognized for tax purposes on
open futures transactions on September 30, 2006.
39
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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 year ended September 30, 2006, the Fund's
custody fee was reduced by $57,640 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.......................................... .525%
Next $500 million........................................... .500%
Next $500 million........................................... .475%
Over $1.5 billion........................................... .450%
</Table>
For the year ended September 30, 2006, the Fund recognized expenses of
approximately $21,900 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 Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the year ended September 30,
2006, the Fund recognized expenses of approximately $124,900 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Legal" expenses on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses 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 year ended
September 30, 2006, the Fund recognized expenses of approximately $549,300
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
40
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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 $257,791 are included in "Other" assets on the Statement of Assets and
Liabilities at September 30, 2006. 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.
For the year ended September 30, 2006, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $169,800 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $87,300. Sales charges do not represent expenses of the
Fund.
3. CAPITAL TRANSACTIONS
For the years ended September 30, 2006 and 2005, transactions were as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
---------------------------- ---------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A........................ 3,647,193 $ 67,459,015 3,391,018 $ 64,402,543
Class B........................ 145,733 2,695,598 254,051 4,816,384
Class C........................ 193,827 3,592,442 298,578 5,659,465
Class I........................ 52,223 957,231 108,413 2,052,256
---------- -------------- ---------- -------------
Total Sales...................... 4,038,976 $ 74,704,286 4,052,060 $ 76,930,648
========== ============== ========== =============
Dividend Reinvestment:
Class A........................ 2,782,083 $ 51,372,658 2,239,715 $ 42,453,709
Class B........................ 99,188 1,829,554 87,830 1,662,581
Class C........................ 45,556 839,386 30,180 570,946
Class I........................ 6,305 116,447 519 9,826
---------- -------------- ---------- -------------
Total Dividend Reinvestment...... 2,933,132 $ 54,158,045 2,358,244 $ 44,697,062
========== ============== ========== =============
Repurchases:
Class A........................ (7,591,729) $ (140,348,327) (6,212,732) $(117,927,260)
Class B........................ (909,576) (16,794,436) (844,830) (16,033,908)
Class C........................ (248,131) (4,575,867) (219,186) (4,154,336)
Class I........................ (27,777) (513,747) (8,717) (165,075)
---------- -------------- ---------- -------------
Total Repurchases................ (8,777,213) $ (162,232,377) (7,285,465) $(138,280,579)
========== ============== ========== =============
</Table>
4. REDEMPTION FEES
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the year ended September 30,
2006, the Fund received redemption fees of approximately $800, which are
reported as part of "Cost of Shares Repurchased" on the Statement of Changes in
Net Assets. The per share impact from redemption fees paid to the Fund was less
than $0.01.
41
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $536,339,837 and $574,524,736,
respectively.
6. 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 may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Fund's 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 a 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
Bonds or Notes for duration and risk management purposes 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 year ended September 30, 2006,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2005........................... 2,992
Futures Opened.............................................. 10,944
Futures Closed.............................................. (13,046)
-------
Outstanding at September 30, 2006........................... 890
=======
</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. These instruments are identified in the Portfolio of
Investments.
42
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
C. INTEREST RATE SWAPS The Fund may enter into forward interest rate swap
transactions intended to help the Fund manage its overall interest rate
sensitivity, either shorter or longer, generally to more closely align the
Fund's interest rate sensitivity with that of the broader municipal market.
Forward interest rate swap transactions involve the Fund's agreement with a
counterparty to pay, in the future, a fixed or variable rate payment in exchange
for the counterparty paying the Fund a variable or fixed rate payment, the
accruals for which would begin at a specified date in the future (the "effective
date"). The amount of the payment obligation is based on the notional amount of
the forward swap contract and the termination date of the swap (which is akin to
a bond's maturity). The value of the Fund's swap commitment would increase or
decrease based primarily on the extent to which long-term interest rates for
bonds having a maturity of the swap's termination date increases or decreases.
The Fund may terminate a swap contract prior to the effective date, at which
point a realized gain or loss is recognized. When a forward swap is terminated,
it ordinarily does not involve the delivery of securities or other underlying
assets or principal, but rather is settled in cash on a net basis. The Fund
intends, but is not obligated, to terminate its forward swaps before the
effective date. Accordingly, the risk of loss with respect to the swap
counterparty on such transactions is limited to the credit risk associated with
a counterparty failing to honor its commitment to pay any realized gain to the
Fund upon termination. To reduce such credit risk, all counterparties are
required to pledge collateral daily (based on the daily valuation of each swap)
on behalf of the Fund with a value approximately equal to the amount of any
unrealized gain. Reciprocally, when the Fund has an unrealized loss on a swap
contract, the Fund has instructed the custodian to pledge cash or liquid
securities as collateral with a value approximately equal to the amount of the
unrealized loss. Collateral pledges are monitored and subsequently adjusted if
and when the swap valuations fluctuate. Restricted cash, if any, for segregating
purposes is shown on the Statement of Assets and Liabilities.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees 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. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $1,072,700 and $58,600
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, the distribution fee is
reduced.
43
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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.
9. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action 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 Van Kampen 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
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal, which is located at the back of this Report.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The impact to the
Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
44
VAN KAMPEN INSURED TAX FREE INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen Insured Tax Free Income
Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Insured Tax Free Income Fund (the "Fund"), including the portfolio of
investments, as of September 30, 2006, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen Insured Tax Free Income Fund at September 30, 2006, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
November 14, 2006
45
VAN KAMPEN INSURED 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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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
One Lincoln Street
Boston, Massachusetts 02111
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
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
September 30, 2006. The Fund designated 99.9% of the income distributions as a
tax-exempt income distribution. The Fund designated and paid $18,477,514 as a
long-term capital gain distribution. In January, the Fund provides tax
information to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
46
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
47
<Table>
<Caption>
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
48
<Table>
<Caption>
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1993 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
49
<Table>
<Caption>
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1984 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing
(64) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
50
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 1984 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
51
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
</Table>
52
<Table>
<Caption>
VAN KAMPEN INSURED TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
</Table>
53
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen -- as well as several other
decisions by other judges in the Southern District of New York and certain other
courts that have dismissed similar complaints against other investment funds --
plaintiff in the derivative action has determined that the suit would be
unsuccessful, if pursued further. Accordingly, plaintiff has asked Judge Owen to
dismiss the action. No attorneys' fees will be paid by defendants and no
consideration will be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than December 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen Insured Tax Free Income Fund
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.
(continued on next page)
Van Kampen Insured Tax Free Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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, 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
(continued on back)
Van Kampen Insured Tax Free Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
32, 332, 532
TFIN ANR 11/06
(VAN KAMPEN INVESTMENTS LOGO) RN06-03167P-Y09/06
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Strategic Municipal Income Fund performed during the 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 September 30, 2006.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUSES CONTAIN
INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS,
CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL PROSPECTUS, CONTACT YOUR
FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. 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 9/30/06
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Municipal Bond Index from 9/30/96 through 9/30/06. Class A shares, adjusted for
sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN STRATEGIC MUNICIPAL LEHMAN BROTHERS MUNICIPAL BOND
INCOME FUND INDEX
------------------------------ ------------------------------
9/96 9523 10000
9629 10113
9756 10298
9742 10255
9753 10274
9832 10369
9788 10230
9854 10316
9954 10471
10055 10583
10337 10876
10269 10774
9/97 10384 10902
10471 10972
10480 11037
10624 11197
10720 11313
10751 11316
10779 11326
10734 11275
10872 11454
10930 11499
10966 11528
11136 11706
9/98 11261 11852
11216 11851
11238 11893
11260 11923
11356 12065
11308 12012
11321 12029
11364 12059
11324 11989
11159 11816
11180 11859
11021 11764
9/99 10979 11769
10835 11642
10912 11765
10798 11678
10666 11627
10775 11762
10917 12019
10848 11948
10763 11886
10940 12201
11057 12371
11158 12561
9/00 11118 12496
11112 12632
11080 12728
11166 13042
11227 13172
11314 13213
11410 13332
11308 13187
11414 13329
11494 13418
11626 13617
11803 13842
9/01 11726 13795
11807 13959
11738 13842
11657 13711
11754 13949
11835 14117
11743 13840
11879 14111
11951 14196
12060 14346
12161 14531
12225 14705
9/02 12345 15028
12185 14778
12212 14717
12371 15028
12314 14990
12465 15199
12426 15208
12540 15309
12751 15667
12789 15601
12525 15055
12596 15167
9/03 12864 15613
12896 15534
12988 15696
13070 15826
13173 15917
13356 16156
13328 16100
13101 15719
13087 15662
13134 15719
13284 15926
13519 16245
9/04 13619 16331
13740 16472
13736 16336
13972 16535
14113 16690
14158 16634
14161 16529
14357 16790
14523 16909
14656 17013
14724 16937
14881 17108
9/05 14674 16992
14610 16889
14702 16970
14914 17116
14981 17162
15173 17278
15172 17158
15194 17153
15308 17229
15354 17164
15561 17368
15781 17626
9/06 15909 17749
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES
6/28/85 4/30/93 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 6.68% 6.44% 5.07% 5.07% 4.76% 4.76%
10-year 5.27 4.75 4.62 4.62 4.54 4.54
5-year 6.29 5.26 5.50 5.26 5.64 5.64
1-year 8.41 3.26 7.54 3.54 7.55 6.55
- ---------------------------------------------------------------------------------------------
30 day SEC Yield 4.54% 4.02% 3.98%
</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. 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 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
MARKET CONDITIONS
Against the backdrop of strong economic growth, good employment data and
inflationary pressures stemming from rising oil prices, the Federal Open Market
Committee (the "Fed") continued its tightening campaign during the first nine
months of the reporting period, raising the federal funds target rate six times
to 5.25 percent at the end of June. As the months progressed, however, economic
growth moderated as consumer spending and housing weakened while inflation
concerns eased, prompting investors to speculate that the Fed would take a break
from rate increases. In August the Fed did pause, ending a two-year run of 17
consecutive rate increases -- the longest stretch of increases in 25 years. At
its September meeting, the Fed again kept its target rate unchanged, and
indicated that any future rate increases would be driven by the weight of
economic data.
As a result of the improved outlook for the fixed income market, yields on
longer-maturity municipal bonds fell dramatically in the latter months of the
reporting year, ultimately ending at the lowest level in decades. Yields on
shorter-maturity municipal bonds, however, moved higher. Accordingly, the slope
of the municipal yield curve flattened as the spread between short-term and
long-term interest rates narrowed.
Demand for municipal bonds continued to be strong during the period. In fact,
inflows into municipal bond funds were 45 percent higher year-to-date through
September than for the same period last year, much of which went into high yield
mutual funds. Because prevailing interest rates were still at relatively low
levels, investors increasingly sought out lower-quality, higher yielding bonds.
The increased demand for high yield bonds led this segment of the market to
considerably outperform high-grade issues. In addition, long-term bonds
continued to earn the best returns, while the short end of the curve posted the
lowest returns as Fed rate increases moved yields in this portion of the curve
higher.
Although municipal bond issuance remained brisk in the last quarter of 2005,
volume declined throughout the remaining months of the period. As of the end of
September, national municipal bond issuance was down 14 percent for 2006. The
reduced supply, coupled with growing demand, further fueled municipal bond
performance.
2
PERFORMANCE ANALYSIS
The fund returned 8.41 percent for the 12 months ended September 30, 2006 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark,
the Lehman Brothers Municipal Bond Index, returned 4.45 percent for the period.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
8.41% 7.54% 7.55% 4.45%
- --------------------------------------------------------------
</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.
A variety of factors contributed to the fund's strong performance during the
reporting year. The fund's allocation to high yield bonds and lower rated bonds
was a considerable driver of performance. Given the relatively low level of
interest rates, investors seeking yield turned to the high yield bond market,
which led to further tightening of credit spreads. (Credit spreads measure the
added compensation investors require to assume risk. When credit spreads
tighten, bonds with lower credit ratings generally outperform higher quality
bonds.) At the same time, supply of new high yield bonds continued to decline.
The combination of steep demand, narrowing spreads, and decreasing supply served
as catalysts to the high yield market. The fund's high yield holdings realized
price appreciation, especially in the health care, special tax district and
master settlement tobacco bonds.
The fund made a major sector change which allowed the fund to capture
considerable gains during the period. August, we sold the portfolio's holdings
in special facility airline revenue bonds, which represented over 10 percent of
the fund's holdings. The airline industry has made a significant turnaround
since September 11, 2001. Consequently, these bonds rallied sharply from their
very depressed levels of only a few years ago. We believed that the prices bonds
were trading at in the summer did not adequately reflect the geopolitical and
oil price risks inherent in the industry. We therefore decided this was a good
time for the fund to exit the sector and lock in gains.
The funds from sale of airline issues were primarily redeployed to increasing
the portfolio's exposure to inverse floating-rate securities,* which offered
attractive yields. At the same time, we initiated hedging strategies to help
offset the additional price volatility of these derivatives. Inverse floaters
held by the fund
*An inverse floating-rate security, or "inverse floater", is a variable rate
security whose coupon rate changes in the opposite direction from the change in
the reference rate used to calculate the coupon rate.
3
carry a AAA rating and, as such, the fund's allocation to higher-rated bonds
increased while the non-rated portion of the portfolio declined to approximately
60 percent of holdings as of the end of the period.
While the fund outperformed its benchmark for the reporting period, the Lehman
Brothers Municipal Bond Index, a few isolated issues declined due to
security-specific reasons. Holdings in the higher education and affordable
senior housing sectors also tempered performance early in the period.
The fund remained well diversified across the municipal bond market. As of
September 30, 2006, the life care, acute care, and special tax/assessment
district sectors represented the largest sector weightings.
We closely manage the growth of the fund's asset base as an important part of
our commitment to the fund's existing shareholders. Based on our analysis of the
supply and demand trends in the market, we believed the prudent course was to
keep the fund closed to new investors during the period.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
4
<Table>
<Caption>
RATINGS ALLOCATIONS AS OF 9/30/06
AAA/Aaa 7.7%
AA/Aa 6.9
A/A 4.4
BBB/Baa 13.1
BB/Ba 2.7
B/B 0.9
CCC/Caa 0.2
Non-Rated 64.1
<Caption>
TOP FIVE SECTORS AS OF 9/30/06
Hospital 17.5%
Life Care 16.3
Special Tax District 14.7
Tobacco Settlement 5.3
Public Buildings 4.9
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
Florida 10.7%
California 8.7
Illinois 7.7
New York 7.5
Texas 6.0
Minnesota 4.6
Pennsylvania 4.3
New Jersey 3.6
Ohio 3.4
Colorado 3.4
Missouri 3.1
Michigan 3.0
Tennessee 2.9
Arizona 2.7
Virginia 2.6
Massachusetts 1.9
Alaska 1.8
Oklahoma 1.8
Puerto Rico 1.7
South Carolina 1.5
Maryland 1.5
Georgia 1.3
Wisconsin 1.3
District of Columbia 1.1
Iowa 0.9
Indiana 0.9
Alabama 0.9
Louisiana 0.8
Oregon 0.8
South Dakota 0.8
Washington 0.6
New Hampshire 0.6
Nevada 0.5
New Mexico 0.5
</Table>
<Table>
(continued on next page)
</Table>
5
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
(continued from previous page)
Connecticut 0.4
Hawaii 0.4
Wyoming 0.3
Kansas 0.3
Rhode Island 0.3
North Carolina 0.3
U. S. Virgin Islands 0.2
Utah 0.2
Idaho 0.2
Montana 0.2
Delaware 0.2
North Dakota 0.2
Vermont 0.1
Mississippi 0.0*
-----
Total Long-Term Investments 98.7%
Short-Term Investments 0.3
Other Assets In Excess Of Liabilities 1.0
-----
Net Assets 100.0%
</Table>
* Amount is less than 0.1%
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 are as a percentage
of long-term investments. Sectors are as a percentage of total 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.
6
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. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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 (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 (800) 847-2424.
7
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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.
8
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 charges on redemptions of Class B and Class C
Shares and redemption fees; 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 4/1/06 - 9/30/06.
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
account values and 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 or redemption fees.
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*
------------------------------------------------
4/1/06 9/30/06 4/1/06-9/30/06
Class A
Actual...................................... $1,000.00 $1,048.54 $4.31
Hypothetical................................ 1,000.00 1,020.87 4.26
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,044.69 8.15
Hypothetical................................ 1,000.00 1,017.07 8.04
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,044.28 8.15
Hypothetical................................ 1,000.00 1,017.07 8.04
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, 1.59%,
and 1.59% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 183/365 (to reflect the
one-half year period).
Assumes all dividends and distributions were reinvested.
9
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
10
together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees
11
discuss with the investment adviser its revenues and expenses, including among
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
12
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MUNICIPAL BONDS 98.7%
ALABAMA 0.9%
$2,000 Alabama Drinking Wtr Fin Auth Revolving
Fd Ln Ser C (AMBAC Insd)................. 5.375% 08/15/23 $ 2,122,540
1,000 Alabama Drinking Wtr Fin Auth Revolving
Fd Ln Ser C (AMBAC Insd)................. 5.750 08/15/18 1,081,060
2,000 Alabama Wtr Pollutn Ctl Auth (AMBAC
Insd).................................... 5.750 08/15/18 2,153,740
1,500 Alexander City, AL Spl Care Fac Fin Auth
Med Fac Rev Russell Hosp Corp Ser A...... 5.750 12/01/36 1,563,810
1,000 Butler, AL Indl Dev Brd Solid GA Pacific
Corp Proj Rfdg (AMT)..................... 5.750 09/01/28 1,024,660
1,500 Colbert Cnty Northwest Auth Hlthcare
Fac...................................... 5.750 06/01/27 1,570,350
250 Huntsville Redstone Vlg, AL Spl Care Fac
Fin Auth Ser A........................... 8.250 12/01/32 272,672
2,500 Huntsville/Carlton Cove, AL Carlton Cove
Inc Proj Ser A........................... 7.000 11/15/17 1,356,975
3 Mobile, AL Indl Dev Brd Solid Waste Disp
Rev Mobile Energy Svc Co Proj Rfdg....... 6.950 01/01/20 293
1,395 Valley, AL Spl Care Fac Fin Auth Rev
Lanier Mem Hosp Ser A.................... 5.600 11/01/16 1,429,749
1,750 Valley, AL Spl Care Fac Fin Auth Rev
Lanier Mem Hosp Ser A.................... 5.650 11/01/22 1,791,492
--------------
14,367,341
--------------
ALASKA 1.8%
1,320 Alaska Indl Dev & Expt Auth Williams
Lynxs AK Cargoport (Acquired 05/17/01,
Cost $1,320,000) (AMT)................... 7.800 05/01/14 1,406,777
3,890 Juneau, AK City & Borough Rev Saint Anns
Care Ctr Proj............................ 6.875 12/01/25 3,999,037
25,000 Northern Tob Securitization Corp. Asset
Bkd Ser A................................ 5.000 06/01/46 25,069,250
--------------
30,475,064
--------------
ARIZONA 2.7%
1,000 Arizona Hlth Fac Auth Rev Terraces Proj
Ser A.................................... 7.500 11/15/23 1,127,360
1,250 Arizona Hlth Fac Auth Rev Terraces Proj
Ser A.................................... 7.750 11/15/33 1,411,812
5,770 Cochise Cnty, AZ Indl Dev Sierra Vista
Cmnty Hosp Ser A Rfdg.................... 6.750 12/01/26 5,895,209
500 Flagstaff, AZ Indl Dev Auth Rev Sr Living
Cmnty Northn AZ Proj..................... 6.300 09/01/38 504,760
985 Flagstaff, AZ Indl Dev Auth Rev Sr Living
Cmnty Northn AZ Proj..................... 7.500 03/01/35 1,074,822
7,000 Glendale, AZ Indl Dev Auth Rfdg.......... 5.000 12/01/35 7,131,600
4,000 Maricopa Cnty, AZ Hlth Fac Rev Catholic
Hlthcare West Ser A...................... 5.500 07/01/26 4,288,880
</Table>
See Notes to Financial Statements 13
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ARIZONA (CONTINUED)
$2,290 Maricopa Cnty, AZ Indl Dev Christian Care
Mesa Inc Proj Ser A (Prerefunded @
04/01/07)................................ 7.750% 04/01/15 $ 2,379,516
2,000 Maricopa Cnty, AZ Indl Dev Christian Care
Mesa Inc Proj Ser A (Prerefunded @
04/01/07)................................ 7.875 04/01/27 2,079,360
1,500 Peoria, AZ Indl Dev Auth Rev Sierra Winds
Life Ser A Rfdg.......................... 6.375 08/15/29 1,555,230
2,525 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac
Choice Ed & Dev Corp Proj................ 6.250 06/01/26 2,577,040
1,865 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac
Milestones Charter Sch Proj.............. 6.750 11/01/33 1,905,191
1,590 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac
P.L.C Charter Sch Proj................... 6.500 04/01/26 1,685,352
2,805 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac
P.L.C Charter Sch Proj................... 6.750 04/01/36 2,992,346
4,225 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac
Premier & Air Co......................... 7.000 09/01/35 4,296,022
800 Pima Cnty, AZ Indl Dev Auth Fac Skyline
Tech High Sch Proj....................... 7.500 02/01/34 814,096
1,000 Pima Cnty, AZ Indl Dev Auth Rev La Posada
at Park Ctr Ser A........................ 7.000 05/15/27 1,029,100
790 Red Hawk Canyon Cmnty Fac Dist No 2 AZ
Dist Assmt Rev Ser A..................... 6.500 12/01/12 808,857
2,080 Tucson, AZ Multi-Family Rev Hsg Catalina
Asstd Living Ser A (AMT)................. 6.500 07/01/31 1,819,896
--------------
45,376,449
--------------
CALIFORNIA 8.7%
1,000 ABAG Fin Auth Nonprofit Corp CA Amern
Baptist Homes Ser A Rfdg................. 5.850 10/01/27 1,014,840
1,000 Beaumont, CA Fin Auth Loc Agy Ser A...... 5.600 09/01/25 1,055,410
2,000 Beaumont, CA Fin Auth Loc Agy Ser A...... 5.650 09/01/30 2,121,620
2,000 Beaumont, CA Fin Auth Loc Agy Ser A...... 5.700 09/01/35 2,109,920
1,000 Beaumont, CA Fin Auth Loc Agy Ser D...... 5.800 09/01/35 1,059,120
1,000 Blythe, CA Redev Agy Proj................ 5.750 05/01/34 1,053,580
1,000 Brentwood, CA Infrastructure Auth Rev.... 5.875 09/02/34 1,030,520
3,750 California Health Fac Fin Auth Rev
(Inverse Fltg) (Acquired 07/27/06, Cost
$3,869,625) (a) (b)...................... 8.054 11/15/34 4,204,725
3,000 California Pollutn Ctl Fin Auth Solid
Waste Disp Rev Solid Waste Mgmt Inc Proj
Ser A 2 (AMT)............................ 5.400 04/01/25 3,178,380
6,150 California St Drivers Ser 1267 (Inverse
Fltg) (Acquired 03/14/06, Cost
$7,554,537) (a) (b)...................... 8.853 02/01/12 7,752,936
5,000 California St Rites Pa 1366 (Inverse
Fltg) (Acquired 03/23/06, Cost
$6,244,600) (a) (b)...................... 8.987 11/01/26 6,420,800
</Table>
14 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$6,485 California St Rites Pa 1396 Ser B (Acquired
08/08/06, Cost $7,527,529) (Inverse Fltg)
(a) (b).................................... 8.000% 09/01/27 $ 8,036,731
1,000 California Statewide Cmnty Dev Auth Elder
Care Alliance Ser A........................ 8.250 11/15/32 1,098,560
940 California Statewide Cmnty Dev Auth
Multi-Family Rev Hsg Heritage Pointe Sr Apt
Ser QQ (Acquired 02/19/02, Cost $937,650)
(AMT) (a).................................. 7.500 10/01/26 977,374
8,000 California Statewide Cmnty Dev Auth Rev
Rols RR II R 571CE 1 (Inverse Fltg)
(Acquired 05/30/06, Cost $8,635,360) (a)
(b)........................................ 7.232 03/01/45 9,678,800
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 1,066,360
1,000 Chino, CA Cmnty Fac Dist No 03 Impt Area
1.......................................... 5.700 09/01/29 1,048,680
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (Escrowed to Maturity) (MBIA Insd)..... * 09/01/17 2,537,300
1,500 Corona-Norco, CA Univ Sch Dist Pub Fin Auth
Spl Tax Rev Ser A.......................... 5.800 09/01/35 1,548,660
2,300 Foothill/Eastern Tran Corridor Agy CA Toll
Rd Rev (MBIA Insd)......................... * 01/15/18 1,310,655
15,000 Golden St Tob Securitization Corp CA Tob
Settlement Rev Rols RR II R 448CE (Inverse
Fltg) (Acquired 11/10/05, Cost $14,652,000)
(a) (b).................................... 6.038 06/01/45 15,772,800
800 Golden St Tob Securitization Corp CA Tob
Settlement Ser 2003 A-1.................... 6.750 06/01/39 906,632
2,720 Golden St Tob Securitization Corp. Rols RR
II R 633 (Inverse Fltg) (Acquired 09/08/06,
Cost $3,066,229) (Ambac Insd) (a).......... 8.358 06/01/45 3,143,014
1,750 Huntington Beach, CA Cmnty No 2003 1
Huntington Ctr............................. 5.800 09/01/23 1,808,362
2,000 Indio, CA Redev Agy Tax Alloc Sub Merged
Proj Area Ser B............................ 6.375 08/15/33 2,180,520
500 Indio, CA Redev Agy Tax Alloc Sub Merged
Proj Area Ser B............................ 6.500 08/15/34 549,160
1,000 Jurupa, CA Cmnty Svc Dist Spl Cmnty Fac
Dist No 4 Ser A............................ 5.700 09/01/34 1,032,270
1,780 Lake Elsinore, CA Pub Fin Auth Loc Agy Rev
Ser F...................................... 7.100 09/01/20 1,862,272
2,500 Lake Elsinore, CA Spl Tax Cmnty Fac Dist 2
Area AA.................................... 5.450 09/01/36 2,571,925
1,000 Lee Lake Wtr Dist CA Cmnty Fac Dist No 1
Spl Tax Sycamore Creek..................... 6.000 09/01/33 1,073,830
</Table>
See Notes to Financial Statements 15
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 905 Lincoln, CA Spl Tax Cmnty Fac Dist No 2003
Ser 1...................................... 6.000% 09/01/34 $ 967,780
3,545 Los Angeles, CA Hbr Dept Rev Rites Pa 1397
Ser A (Inverse Fltg)....................... 8.155 08/01/22 4,534,303
2,100 Los Angeles, CA Hbr Dept Rev Rites Pa 1397
Ser B (Inverse Fltg)....................... 8.155 08/01/23 2,686,047
1,395 Millbrae, CA Residential Fac Rev Magnolia
of Millbrae Proj Ser A (AMT)............... 7.375 09/01/27 1,454,455
1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks
Impt Area A................................ 5.900 09/01/27 1,061,250
1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks
Impt Area A................................ 6.000 09/01/34 1,066,390
1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks
Impt Area B................................ 6.000 09/01/27 1,067,740
3,000 Northstar Cmnty Svc Dist CA Spl Tax Cmnty
Fac Dist No 1.............................. 5.450 09/01/28 3,065,820
1,000 Palmdale, CA Spl Tax Cmnty Fac 03-1
Anaverde A................................. 5.350 09/01/30 1,032,210
1,100 Palmdale, CA Spl Tax Cmnty Fac 03-1
Anaverde A................................. 5.400 09/01/35 1,133,605
1,000 Perris, CA Cmnty Fac Dist Spl Tax No 01-2
Ser A...................................... 6.375 09/01/32 1,086,490
2,000 Rancho Cordova Cmnty Fac Dist CA Spl Tax No
2003 1 Sunridge Anatolia................... 5.500 09/01/37 2,055,960
2,000 Riverside, CA Univ Sch Dist Tax Cmnty Fac
Dist 15 Impt Area 1........................ 5.550 09/01/30 2,063,300
6,000 San Jose, CA Multi-Family Hsg Rev Helzer
Courts Apt Proj Ser A (AMT)................ 6.400 12/01/41 6,082,140
2,000 San Marcos, CA Pub Fac Auth Spl Tax Rev Ser
A.......................................... 5.650 09/01/36 2,066,560
3,000 Temecula, CA Pub Fin Auth Spl Tax Roripaugh
Cmnty Fac Dist 03-2........................ 5.500 09/01/36 2,810,220
35,000 Tobacco Securitization Southn CA Tob
Settlement Cabs-First Sub.................. * 06/01/46 3,152,100
27,200 Tobacco Securitization Southn CA Tob
Settlement Cabs-Second Sub................. * 06/01/46 2,269,296
47,000 Tobacco Securitization Southn CA Tob
Settlement Cabs-Third Sub.................. * 06/01/46 3,058,290
1,000 Upland, CA Cmnty Fac Dist 2003 San Antonio
Impt 1 A................................... 5.900 09/01/24 1,060,770
1,500 Upland, CA Cmnty Fac Dist 2003 San Antonio
Impt 1 A................................... 6.000 09/01/34 1,584,540
1,965 Vallejo, CA Ctf Partn Touro Univ........... 7.250 06/01/16 2,098,620
945 Vallejo, CA Pub Fin Auth Loc Hiddenbrooke
Impt Dist Ser A............................ 5.800 09/01/31 971,224
</Table>
16 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$1,000 Woodland, CA Spl Tax Cmnty Fac Dist 1
Spring Lake................................ 6.250% 09/01/34 $ 1,098,220
1,800 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/31 1,924,362
3,000 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/39 3,195,120
--------------
143,852,568
--------------
COLORADO 3.4%
1,060 Beacon Pt Metro Dist CO Ser A.............. 6.125 12/01/25 1,127,140
1,005 Beacon Pt Metro Dist CO Ser A.............. 6.250 12/01/35 1,072,425
1,000 Bromley Pk Metro Dist CO No 2 Ser B........ 8.050 12/01/32 1,080,550
1,000 Castle Oaks Metro Dist CO Ltd Tax.......... 6.000 12/01/25 1,046,920
1,500 Castle Oaks Metro Dist CO Ltd Tax.......... 6.125 12/01/35 1,574,955
795 Colorado Ed & Cultural Fac Charter Sch
Frontier Academy........................... 7.250 06/01/20 852,057
2,000 Colorado Hlth Fac Auth Rev Baptist Home
Assn Ser A................................. 6.375 08/15/24 2,000,080
2,000 Colorado Hlth Fac Auth Rev Baptist Home
Assn Ser B (Variable Rate Coupon).......... 6.500 08/15/27 1,989,260
1,060 Colorado Hlth Fac Auth Rev Christian Living
Campus Proj Ser A.......................... 7.050 01/01/19 1,076,070
2,000 Colorado Intl Ctr Metro Dist No 3 (FGIC
Insd)...................................... 6.500 12/01/35 2,082,060
2,000 Copperleaf Met Dist No 2 CO (Acquired
09/15/06, Cost $2,000,000) (a)............. 5.950 12/01/36 2,038,780
3,765 Denver, CO City & Cnty Arpt Revdrivers Ser
1450 (Inverse Fltg) (Acquired 08/11/06,
Cost $4,512,955) (XLCA Insd) (a)........... 7.825 05/15/14 4,831,662
3,750 Denver, CO Convention Ctr Hotelrols RR II R
618 (Inverse Fltg) (Acquired 08/30/06, Cost
$4,317,600) (a)............................ 8.298 12/01/35 4,495,050
3,425 Denver, CO Hlth & Hosp Auth Ser A Rfdg..... 6.250 12/01/33 3,824,629
2,500 Elk Vly, CO Pub Impt Fee Ser A............. 7.300 09/01/22 2,685,175
1,150 High Plains Metro Dist CO Ser A............ 6.125 12/01/25 1,222,841
2,250 High Plains Metro Dist CO Ser A............ 6.250 12/01/35 2,400,952
615 Lafayette, CO Indl Dev Rev Rocky Mtn Instr
Proj Ser A................................. 6.750 10/01/14 512,393
1,920 Lafayette, CO Indl Dev Rev Rocky Mtn Instr
Proj Ser A (AMT)........................... 7.000 10/01/18 1,554,048
4,700 Lake Creek Affordable Hsg Corp Hsg Proj Ser
A Rfdg..................................... 6.250 12/01/23 4,918,080
500 Neu Towne, CO Metro Dist................... 7.250 12/01/34 549,845
3,500 Northwest CO Metro Dist No 3 Ltd Tax....... 6.125 12/01/25 3,716,440
1,500 Salida, CO Hosp Dist Rev (d)............... 5.250 10/01/36 1,492,140
1,000 Serenity Ridge, CO Metro Dist No 2......... 7.500 12/01/34 1,115,830
1,672 Skyland Metro Dist CO Gunnison Cnty Rfdg... 6.750 12/01/22 1,724,049
1,000 Southlands Metro Dist No 1 CO.............. 7.000 12/01/24 1,106,230
</Table>
See Notes to Financial Statements 17
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$1,000 Vista Ridge Met Dist, CO Ref Ltd Tax Sub
Ser B...................................... 6.625% 12/01/40 $ 1,008,940
1,000 Wheatlands Metro Dist No 2 CO Ltd Tax...... 6.000 12/01/25 1,033,730
1,500 Wheatlands Metro Dist No 2 CO Ltd Tax...... 6.125 12/01/35 1,553,025
--------------
55,685,356
--------------
CONNECTICUT 0.4%
1,500 Connecticut St Dev Auth Indl Afco Cargo
Bldg LLC Proj (AMT)........................ 8.000 04/01/30 1,631,145
2,000 Mohegan Tribe Indians CT Pub Impt Priority
Dist (Acquired 09/27/01, Cost $1,955,120)
(a)........................................ 6.250 01/01/31 2,132,960
3,500 Mohegan Tribe Indians CT Pub Impt Priority
Dist (Acquired 11/03/04, Cost $3,418,565)
(a)........................................ 5.250 01/01/33 3,545,815
--------------
7,309,920
--------------
DELAWARE 0.2%
850 Sussex Cnty, DE Rev Adj First Mtg Cadbury
Lewes Ser A................................ 5.900 01/01/26 886,592
1,000 Sussex Cnty, DE Rev Adj First Mtg Cadbury
Lewes Ser A................................ 6.000 01/01/35 1,044,640
1,060 Wilmington, DE Multi-Family Rent Rev Hsg
Electra Arms Sr Assoc Proj (AMT)........... 6.250 06/01/28 1,083,733
--------------
3,014,965
--------------
DISTRICT OF COLUMBIA 1.1%
28,940 District Columbia Tob Settlement Fin Corp
Ser A...................................... * 06/15/46 2,572,477
17,500 District Columbia Tob Settlement Fin Corp
Ser B...................................... * 06/15/46 1,470,525
67,660 District Columbia Tob Settlement Fin Corp
Ser C...................................... * 06/15/55 2,548,076
7,820 District of Columbia Ballpark Rev Drivers
Ser 1325 (Inverse Fltg) (Acquired 05/07/06,
Cost $9,074,015) (FGIC Insd) (a)........... 8.771 02/01/14 10,309,888
1,000 District of Columbia Rev Methodist Home
Issue...................................... 6.000 01/01/29 1,018,640
85 District of Columbia Ser A-1 (Escrowed to
Maturity) (MBIA Insd)...................... 6.500 06/01/10 93,572
--------------
18,013,178
--------------
FLORIDA 10.7%
1,000 Anthem Pk Cmnty Dev Dist FL Cap Impt Rev... 5.800 05/01/36 1,039,820
1,375 Bay Laurel Ctr Cmnty Dev Dist FL Spl Assmt
Candler.................................... 5.450 05/01/37 1,401,152
1,000 Bellalago Ed Fac Benefits Ser A............ 6.000 05/01/33 1,053,100
985 Bellalago Ed Fac Benefits Ser B............ 5.800 05/01/34 1,024,814
</Table>
18 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$4,315 Bloomingdale, FL Cmnty Dev Dist Spl Assmt
Rev........................................ 5.875% 05/01/36 $ 4,544,170
985 Bluewaters Cmnty Dev Dist of FL............ 6.000 05/01/35 1,042,120
2,350 Boca Raton, FL Hsg Auth Mtg Hsg Rev First
Lien Banyan Pl Sr Apt Rfdg (Acquired
03/23/06, Cost $2,317,265) (a)............. 5.900 10/01/36 2,354,042
1,830 Boca Raton, FL Hsg Auth Mtg Hsg Rev First
Lien Banyan Pl Sr Apt Rfdg (Acquired
3/23/06, Cost $1,811,556) (a).............. 5.800 10/01/26 1,830,274
2,500 Bonnet Creek Resort Cmnty Dev.............. 7.500 05/01/34 2,757,975
5,000 Brevard Cnty, FL Hlth Fac Auth Hlthcare Fac
Rev Rites Pa 1342 (Inverse Fltg) (Acquired
12/08/05, Cost $4,707,600) (a) (b)......... 7.587 04/01/34 5,653,900
785 Caribe Palm Cmnty Dev Dist FL Spl Assmt Ser
A.......................................... 5.850 05/01/35 820,992
1,000 City Ctr Cmnty Dev Dist FL Spl Assmt Rev
Ser A...................................... 6.125 05/01/36 1,026,170
2,555 Escambia Cnty, FL Rev ICF/MR Pensacola Care
Dev Ctr Ser A.............................. 10.250 07/01/11 2,579,835
1,085 Escambia Cnty, FL Rev ICF/MR Pensacola Care
Dev Ctr.................................... 10.250 07/01/11 1,095,546
5,000 Fiddlers Creek Cmnty Dev Dist.............. 6.000 05/01/38 5,301,100
3,630 Florida Hsg Fin Corp Rev Hsg Beacon Hill
Apt Ser C (AMT)............................ 6.610 07/01/38 3,754,073
7,055 Florida Hsg Fin Corp Rev Hsg Cypress Trace
Apt Ser G (AMT)............................ 6.600 07/01/38 7,269,754
4,775 Florida Hsg Fin Corp Rev Hsg Westchase Apt
Ser B (AMT)................................ 6.610 07/01/38 4,913,809
4,935 Halifax Hosp Med Ctr FL Hosp Rev Rols RR II
R 584CE (Inverse Fltg) (Acquired 06/16/06,
Cost $5,683,000) (a)....................... 9.792 06/01/46 5,995,828
2,690 Hammock Bay Cmnty Dev Dist FL Spl Assmt Rev
Ser A...................................... 6.125 05/01/35 2,833,296
1,480 Harbour Isles Cmnty Dev Dist of FL......... 6.125 05/01/35 1,573,255
290 Heritage Harbor Cmnty Dev Dist FL Rev Rec.. 7.750 05/01/23 290,896
775 Heritage Harbor Cmnty Dev Dist FL Rev Spl
Assmt Ser A................................ 6.700 05/01/19 790,151
7,875 Highlands Cnty, FL Hlth Fac Auth Rev Rols
RR II R 577 CE 2 (Inverse Fltg) (Acquired
06/08/06, Cost $9,005,301) (a)............. 9.038 11/15/36 9,778,072
2,000 Highlands, FL Cmnty Dev Dist Spl Assmt..... 5.550 05/01/36 2,045,800
6,000 Hillsborough Cnty, FL Indl Dev Tampa Gen
Hosp Proj.................................. 5.250 10/01/41 6,346,440
3,500 Hillsborough Cnty, FL Hsg Fin Hsg Clipper
Cove Apt Proj Ser A (AMT).................. 7.375 07/01/40 3,753,785
</Table>
See Notes to Financial Statements 19
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 990 Islands at Doral III Cmnty 2004 Ser A...... 5.900% 05/01/35 $ 1,029,026
1,000 Islands at Doral NE Cmnty Dev.............. 6.250 05/01/34 1,072,840
6,410 Jea, FL Wtr & Swr Sys Rev Drivers Ser 805
(Inverse Fltg) (Acquired 03/22/05, Cost
$6,268,702) (MBIA Insd) (a)................ 5.430 10/01/12 6,559,802
1,530 Kendall Breeze West Cmnty Dev Dist FL Spl
Assmt (b).................................. 5.875 05/01/34 1,612,436
1,975 Keys Cove Cmnty Dev Dist FL Assmt Rev...... 5.875 05/01/35 2,082,953
2,940 Keys Cove Cmnty Dev Dist II FL............. 5.500 05/01/36 2,989,127
2,000 Lee Cnty, FL Indl Dev Auth Hlthcare Fac Rev
Cypress Cove Hlthpk Ser A.................. 6.750 10/01/32 2,156,440
3,435 Leon Cnty, FL Ed Fac Auth Rev Southgate
Residence Hall Ser A Rfdg.................. 6.750 09/01/28 3,546,054
1,255 Lexington Cmnty Dev Dist FL................ 6.125 05/01/34 1,325,180
75 Marshall Creek Cmnty Dev FL Spl Assmt Ser
B.......................................... 6.750 05/01/07 75,115
2,470 Meadow Woods Cmnty Dev Dist FL Ser A....... 6.050 05/01/35 2,572,999
1,000 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med
Ctr FL Proj................................ 5.375 11/15/28 1,015,630
2,500 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med
Ctr Rfdg (Acquired 04/26/04, Cost
$2,411,600) (a)............................ 6.750 11/15/29 2,863,625
3,000 Midtown Miami, FL Cmnty Dev Dist Ser A..... 6.000 05/01/24 3,265,350
1,120 Miromar Lakes Cmnty Dev Dist Ser B Rfdg.... 7.250 05/01/12 1,234,890
6,250 Municipal Secs Tr Ctfs Ser 7014 Tr Cl B
144A (Inverse Fltg) (Acquired 08/09/06,
Cost $6,919,250) (Prerefunded @ 11/15/10)
(AMT) (CIFG Insd) (a) (b).................. 8.110 10/01/38 7,204,625
885 Northern Palm Beach Cnty Dist FL Impt Wtr
Ctl & Impt Unit Dev No 16 Rfdg............. 7.500 08/01/24 950,977
1,750 Oak Creek Cmnty Dev Dist FL Spl Assmt...... 5.800 05/01/35 1,819,685
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys (Prerefunded @
11/15/10).................................. 6.375 11/15/20 1,111,700
2,000 Orange Cnty, FL Hlth Fac Auth Rev
Westminster Cmnty Care..................... 6.600 04/01/24 2,076,360
990 Overoaks, FL Cmnty Dev Dist CA Ser A....... 6.125 05/01/35 1,052,380
5,000 Palm Coast Pk Cmnty Dev Dist FL Spl Assmt
Rev........................................ 5.700 05/01/37 5,095,900
985 Parklands Lee Cmnty Dev Dist FL Spl Assmt
Ser A...................................... 5.800 05/01/35 1,020,056
985 Pine Is Cmnty Dev Dist FL Spl Assmt........ 5.750 05/01/35 1,018,451
3,000 Pinellas Cnty, FL Hlth Fac Auth Oaks of
Clearwtr Proj.............................. 6.250 06/01/34 3,210,570
1,000 Reunion East Cmnty Dev Dist................ 5.800 05/01/36 1,041,240
2,000 Reunion West Cmnty Dev Dist................ 6.250 05/01/36 2,122,100
</Table>
20 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 965 Saddlebrook, FL Cmnty Ser A................ 6.900% 05/01/33 $ 1,040,212
500 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Glenmoor Saint John's Proj Ser
A.......................................... 8.000 01/01/17 535,820
4,500 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Glenmoor Saint John's Proj Ser
A.......................................... 8.000 01/01/30 4,822,380
2,000 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Rev Bayview Proj Ser A............ 7.100 10/01/26 2,021,100
1,955 Silver Palms Cmnty Dev Dist................ 5.900 05/01/34 2,054,940
1,300 South Dade Venture Cmnty Dev............... 6.125 05/01/34 1,389,336
1,480 South Vlg Cmnty Dev Dist FL Cap Impt Rev
Ser A...................................... 5.700 05/01/35 1,525,332
1,600 St Johns Cnty, FL Indl Dev Auth Glenmoor Pj
Ser A (d).................................. 5.375 01/01/40 1,602,176
115 Stoneybrook West Cmnty Dev Dist FL Spl
Assmt Rev Ser B............................ 6.450 05/01/10 115,221
4,000 Tisons Landing Cmnty Dev Dist FL Spl Assmt
Ser A...................................... 5.625 05/01/37 4,081,640
1,480 Town Ctr at Palm Coast Cmnty Dev Dist FL
Cap Impt Rev............................... 6.000 05/01/36 1,541,612
1,480 Turnbull Creek Cmnty Dev Dist FL Spl
Assmt...................................... 5.800 05/01/35 1,531,741
1,652 University Square Cmnty Dev Dist FL Cap
Impt Rev (Acquired 10/07/99 to 09/07/00,
Cost $1,650,391) (a)....................... 6.750 05/01/20 1,774,397
2,000 Volusia Cnty, FL Indl Dev Auth Bishops Glen
Proj Rfdg (Prerefunded @ 11/01/06)......... 7.625 11/01/26 2,046,860
2,000 West Vlg Impt Dist FL Rev Spl Assmt Unit of
Dev No 3................................... 5.500 05/01/37 2,045,900
2,000 Winter Garden Vlg at Fowler Groves Cmnty
Dev Dist FL Spl............................ 5.650 05/01/37 2,063,360
1,000 World Comm Cmnty Dev Dist Ser A1........... 6.250 05/01/22 1,069,440
1,695 World Comm Cmnty Dev Dist Ser A2........... 6.125 05/01/35 1,810,277
--------------
177,067,424
--------------
GEORGIA 1.3%
2,000 Atlanta, GA Tax Alloc Atlantic Sta Proj.... 7.750 12/01/14 2,218,880
1,235 Atlanta, GA Tax Alloc Princeton Lakes Proj
(Acquired 03/10/06, Cost $1,235,000) (a)... 5.500 01/01/31 1,257,749
2,305 Atlanta, GA Urban Residential Fin Auth
Multi-Family Rev John Eagan Proj Ser A
(AMT)...................................... 6.750 07/01/30 2,378,852
1,000 Effingham Cnty, GA Dev Auth Solfort James
Proj (AMT)................................. 5.625 07/01/18 1,010,850
1,800 Fulton Cnty, GA Residential Care Canterbury
Court Proj Ser A........................... 6.000 02/15/22 1,831,698
650 Fulton Cnty, GA Residential Care Canterbury
Court Proj Ser A........................... 6.125 02/15/34 675,187
</Table>
See Notes to Financial Statements 21
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
GEORGIA (CONTINUED)
$3,500 Fulton Cnty, GA Residential Care Sr Lien
RHA Asstd Living Ser A..................... 7.000% 07/01/29 $ 3,683,680
4,000 Milledgeville Baldwin Cnty, GA College & St
Univ Fndtn................................. 5.625 09/01/30 4,304,280
1,000 Private Colleges & Univ Auth GA Mercer Hsg
Corp Proj Ser A............................ 6.000 06/01/21 1,075,220
2,930 Renaissance on Peachtree Unit Invt Tr Ctf
GA Custody Ctf (Variable Rate Coupon)...... 6.000 10/01/25 2,589,827
--------------
21,026,223
--------------
HAWAII 0.4%
2,500 Hawaii St Dept Budget & Fin Spl Purp Rev
Kahala Nui Proj Ser A...................... 8.000 11/15/33 2,900,425
2,825 Kuakini, HI Hlth Sys Spl Ser A............. 6.375 07/01/32 3,098,968
--------------
5,999,393
--------------
IDAHO 0.2%
3,000 Idaho Hlth Fac Auth Rev Vly Vista Care Ser
A Rfdg..................................... 7.875 11/15/29 3,138,360
--------------
ILLINOIS 7.7%
2,500 Bolingbrook, IL Cap Apprec Ser B (MBIA
Insd)...................................... * 01/01/29 769,425
4,000 Bolingbrook, IL Sales Tax Rev Bolingbrook
(c)........................................ 0.000/6.250 01/01/24 3,885,920
1,984 Bolingbrook, IL Spl Svc Area No 01-1....... 7.375 07/01/31 2,158,215
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 1,600,770
1,665 Bolingbrook, IL Spl Svc Area No 1 Spl Tax
Augusta Vlg Proj Ser 2004.................. 6.250 03/01/32 1,721,260
2,000 Bolingbrook, IL Spl Svc Area No 1 Spl Tax
Forest City Tax Proj (c)................... 0.000/5.900 03/01/27 2,009,920
1,894 Bolingbrook, IL Spl Svc Area No 3 Lakewood
Ridge Proj................................. 7.050 03/01/31 2,028,663
735 Cary, IL Spl Tax Svc Area No 1 Cambridge
Ser A (Prerefunded @ 03/01/10)............. 7.625 03/01/30 834,129
1,750 Chicago, IL Incrmnt Aloctn Rev Diversey
Narragansett Proj Nt (Acquired 08/01/06,
Cost $1,867,810) (AMT) (FSA Insd) (a)...... 7.460 02/15/26 1,876,560
1,305 Chicago, IL 2006 Proj & Rfdg Ser A (MBIA
Insd)...................................... 5.500 01/01/38 1,399,260
3,875 Chicago, IL O'Hare Intl Arpt Rev RR II R
239-1 (Inverse Fltg) (Acquired 08/18/03,
Cost $4,166,894) (AMT) (FSA Insd) (a)...... 11.299 01/01/19 5,454,760
50 Chicago, IL Proj Ser A Rfdg (Prerefunded @
01/01/11) (MBIA Insd)...................... 5.500 01/01/38 54,257
4,000 Chicago, IL Spl Assmt Lakeshore East
Proj....................................... 6.625 12/01/22 4,341,200
</Table>
22 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 760 Chicago, IL Tax Increment Alloc Read
Dunning Ser B (ACA Insd)................... 7.250% 01/01/14 $ 781,189
3,000 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A (ACA Insd)................ 6.500 12/01/06 3,014,010
1,925 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A (ACA Insd)................ 6.500 12/01/08 2,031,221
1,000 Clay Cnty, IL Hosp Rev (Prerefunded @
12/01/08).................................. 5.900 12/01/28 1,067,160
3,500 Cortland, IL Spl Tax Rev Sheaffer Sys Proj
(Acquired 05/02/06, Cost $3,465,000) (a)... 5.500 03/01/17 3,536,085
2,000 Deerfield, IL Ed Fac Chicagoland Jewish
High Sch Proj.............................. 6.000 05/01/41 2,044,480
1,127 Gilberts, IL Spl Svc Area No 9 Spl Tax Big
Timber Proj (Escrowed to Maturity) (b)..... 7.375 03/01/11 1,226,976
1,245 Gilberts, IL Spl Svc Area No 9 Spl Tax Big
Timber Proj (Prerefunded @ 03/01/11) (h)... 7.750 03/01/27 1,465,875
1,500 Godfrey, IL Rev Utd Methodist Vlg Ser A.... 5.875 11/15/29 1,245,435
2,700 Hoopeston, IL Hosp Cap Imot Rev Hoopeston
Cmnty Mem Hosp Impt & Rfdg................. 6.550 11/15/29 2,725,569
1,660 Huntley, IL Increment Alloc Rev Huntley
Redev Proj Ser A........................... 8.500 12/01/15 1,688,901
187 Huntley, IL Spl Svc Area No 10 Spl Tax Ser
A (b)...................................... 6.250 03/01/09 193,837
2,621 Huntley, IL Spl Svc Area No 10 Spl Tax Ser
A.......................................... 6.500 03/01/29 2,780,435
9,000 Illinois Fin Auth Rev Clare at Wtr Tower
Proj Ser A................................. 6.125 05/15/38 9,377,820
4,500 Illinois Fin Auth Rev Clare Oaks Proj Ser
A.......................................... 6.000 11/15/39 4,686,795
1,405 Illinois Fin Auth Rev Cmnty Fac Clinic
Altgeld Proj............................... 8.000 11/15/16 1,436,528
500 Illinois Fin Auth Rev Fairview Oblig Grp
Ser A Rfdg................................. 6.000 08/15/20 509,860
500 Illinois Fin Auth Rev Fairview Oblig Grp
Ser A Rfdg................................. 6.125 08/15/27 508,175
1,000 Illinois Fin Auth Rev Friendship Vlg
Schaumburg Ser A........................... 5.375 02/15/25 1,014,410
2,000 Illinois Fin Auth Rev Friendship Vlg
Schaumburg Ser A........................... 5.875 02/15/37 2,057,000
2,700 Illinois Fin Auth Rev Kewanee Hosp Proj.... 5.000 08/15/26 2,717,631
3,000 Illinois Fin Auth Rev Landing at Plymouth
Pl Proj A.................................. 6.000 05/15/37 3,151,230
750 Illinois Fin Auth Rev Luther Oaks Proj Ser
A.......................................... 6.000 08/15/26 786,390
2,000 Illinois Fin Auth Rev Luther Oaks Proj Ser
A.......................................... 6.000 08/15/39 2,081,460
</Table>
See Notes to Financial Statements 23
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$3,000 Illinois Fin Auth Rev Northwestn Mem Hosp
Ser A...................................... 5.500% 08/15/43 $ 3,278,700
1,500 Illinois Fin Auth Rev Three Crowns Pk Plaza
Ser A...................................... 5.875 02/15/38 1,551,000
3,750 Illinois Fin Auth Student Hsg Ref Edl
Advancement Fd Inc. Ser B (d).............. 5.000 05/01/25 3,892,837
1,000 Illinois Hlth Fac Auth Rev Ctr Baptist Home
Proj....................................... 7.125 11/15/29 1,055,490
2,500 Illinois Hlth Fac Auth Rev Decatur Mem
Hosp....................................... 5.750 10/01/24 2,655,325
650 Illinois Hlth Fac Auth Rev Loyola Univ Hlth
Sys Ser A.................................. 6.000 07/01/21 691,990
1,200 Illinois Hlth Fac Auth Rev Lutheran Sr
Ministries Oblig Ser A (Prerefunded
08/15/11).................................. 7.375 08/15/31 1,406,304
250 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.200 08/15/23 254,367
1,125 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.400 08/15/33 1,145,689
400 Illinois Hlth Fac Auth Rev Silver Cross.... 5.500 08/15/19 415,336
675 Lake Cnty, IL Fst Presv Dist Ld Acquisition
& Dev...................................... 5.750 12/15/17 728,872
80 Lake, Cook, Kane & McHenry Cntys, IL Cmnty
Unit Sch Dist No 22 (FGIC Insd)............ 5.750 12/01/19 86,138
2,200 Manhattan, IL No 04-1 Brookstone Springs
Proj....................................... 6.100 03/01/35 2,268,310
1,000 Minooka, IL Spl Assmt Impt Lakewood Trls
Unit 2 Proj................................ 6.375 03/01/34 1,056,460
1,193 Montgomery, IL Spl Assmt Impt Lakewood
Creek Proj................................. 7.750 03/01/30 1,311,107
1,800 Peoria, IL Spl Tax Weaverridge Spl Svc Area
(Prerefunded 02/01/07)..................... 8.050 02/01/17 1,860,498
3,000 Pingree Grove, IL Spl Svc Area No 2 Spl Tax
Ser 05-2 Cambridge Lakes Proj.............. 6.000 03/01/35 3,056,850
2,250 Pingree Grove, IL Spl Svc Area No 7 Spl Tax
Ser 06-1 Cambridge Lakes Proj.............. 6.000 03/01/36 2,301,052
2,000 Plano, IL Spl Svc Area No 1 Lakewood
Springs Proj Ser A......................... 6.200 03/01/34 2,083,120
2,095 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000 06/01/17 2,805,477
935 Sterling, IL Rev Hoosier Care Proj Ser A... 7.125 06/01/34 952,615
1,925 Volo Vlg, IL Spl Svc Area No 3 Symphony
Meadows Pj Ser 1........................... 6.000 03/01/36 1,954,318
3,135 Wheeling, IL Tax Increment Rev N
Milwaukee/Lake Cook Tif Proj............... 6.000 01/01/25 3,102,114
</Table>
24 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$5,650 Yorkville, IL Utd City Spl Svc Area Spl Tax
No 2004 107 Raintree Vlg II Proj........... 6.250% 03/01/35 $ 5,993,972
2,000 Yorkville, IL Utd City Spl Svc Area Spl Tax
No 4 104 Mpi Grade Resv Proj............... 6.375 03/01/34 2,128,000
--------------
128,298,752
--------------
INDIANA 0.9%
825 Crawfordsville, IN Redev Cmnty Redev Dist
Tax Increment Rev (Acquired 10/15/97, Cost
$825,000) (a) (b).......................... 7.000 02/01/12 847,011
1,875 Indiana Hlth Fac Fin Auth Rev Hoosier Care
Proj Ser A................................. 7.125 06/01/34 1,910,325
6,500 Indiana Hlth Fac Hosp Rev Cmnty Fndtn
Northwest IN Ser A......................... 6.000 03/01/34 6,978,790
2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt
(AMT)...................................... 6.375 11/01/29 2,173,460
1,810 Portage, IN Spl Impt Dist Rev Marina Shores
Proj....................................... 6.375 03/01/35 1,861,223
265 Saint Joseph Cnty, IN Econ Dev Rev Holy
Cross Vlg Notre Dame Proj A................ 5.700 05/15/28 269,118
230 Saint Joseph Cnty, IN Econ Dev Rev Holy
Cross Vlg Notre Dame Proj A................ 6.000 05/15/26 243,782
470 Saint Joseph Cnty, IN Econ Dev Rev Holy
Cross Vlg Notre Dame Proj A................ 6.000 05/15/38 492,720
--------------
14,776,429
--------------
IOWA 0.9%
1,000 Bremer Cnty, IA Retirement Fac Rev Bartels
Lutheran Ser A............................. 5.375 11/15/27 1,016,520
2,000 Estherville, IA Hosp Rev Avera Holy Family
Proj....................................... 6.250 07/01/26 2,141,100
375 Evansdale, IA Hlthcare Westn Home Proj..... 6.000 11/01/26 384,484
3,400 Evansdale, IA Hlthcare Westn Home Proj Ser
A (b)...................................... 6.000 11/01/26 3,473,746
3,250 Iowa Fin Auth Hlth Facs Rev Dev Care
Initiatives Pj Ser A....................... 5.500 07/01/25 3,416,270
1,520 Iowa Fin Auth Hlthcare Fac Care Initiatives
Proj Rfdg (Prerefunded @ 07/01/11)......... 9.250 07/01/25 1,895,030
500 Iowa Fin Auth Retirement Cmnty Friendship
Haven Proj Ser A........................... 5.750 11/15/19 506,585
500 Iowa Fin Auth Retirement Cmnty Friendship
Haven Proj Ser A........................... 6.000 11/15/24 511,155
800 Iowa Fin Auth Retirement Cmnty Friendship
Haven Proj Ser A........................... 6.125 11/15/32 817,232
1,000 Polk Cnty, IA Hlthcare Fac Rev Luther Pk
Hlth Ctr Inc Proj.......................... 6.150 10/01/36 1,023,220
--------------
15,185,342
--------------
</Table>
See Notes to Financial Statements 25
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
KANSAS 0.3%
$ 910 Lawrence, KS Coml Dev Rev Holiday Inn Sr
Ser A Rfdg (e)............................. 8.000% 07/01/16 $ 378,087
1,000 Lenexa, KS Hlthcare Fac Rev Lakeview Vlg
Inc Ser B.................................. 6.250 05/15/26 1,025,040
915 Manhattan, KS Coml Dev Rev Holiday Inn Sr
Ser A Rfdg (e)............................. 8.000 07/01/16 439,703
1,000 Olathe, KS Sr Living Fac Rev Catholic Care
Campus Inc Ser A........................... 6.000 11/15/26 1,062,300
1,000 Olathe, KS Sr Living Fac Rev Catholic Care
Campus Inc Ser A........................... 6.000 11/15/38 1,052,960
1,500 Overland Pk, KS Dev Corp Rev First Tier
Overland Park Ser A........................ 7.375 01/01/32 1,644,630
--------------
5,602,720
--------------
LOUISIANA 0.8%
1,965 Louisiana Hsg Fin Agy Rev Azalea Estates
Ser A Rfdg (AMT) (GNMA Collateralized)..... 5.375 10/20/39 2,059,634
1,800 Louisiana Loc Govt Environment Fac Cmnty
Dev Auth Rev Hlthcare Saint James Place Ser
A Rfdg..................................... 7.000 11/01/29 1,869,984
4,100 Louisiana Loc Govt Environment Fac Cmnty
Dev Auth Rev Hlthcare Saint James Place Ser
A Rfdg..................................... 7.000 11/01/25 4,269,945
1,500 Louisiana Pub Fac Auth Rev Progressive
Hlthcare................................... 6.375 10/01/20 1,508,655
1,000 Louisiana Pub Fac Auth Rev Progressive
Hlthcare................................... 6.375 10/01/28 1,002,260
2,973 Louisiana St Univ & Agric & Mechanical
College Univ Rev Master Agreement (Acquired
11/30/98, Cost $2,973,329) (a)............. 5.750 10/30/18 2,847,111
--------------
13,557,589
--------------
MARYLAND 1.5%
1,000 Baltimore Cnty, MD Mtg Rev Shelter Elder
Care Ser A................................. 7.250 11/01/29 1,040,300
1,500 Brunswick MD Spl Oblg Bruinswick Crossing
Spl Taxing................................. 5.500 07/01/36 1,531,080
4,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty
Dev Auth Ser A............................. 5.950 07/01/30 4,122,200
1,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty
Dev Auth Ser B............................. 6.250 07/01/30 1,031,840
230 Maryland St Econ Dev Corp Air Cargo Rev
Afco Cargo BWI II LLC Proj (AMT) (b)....... 6.250 07/01/07 231,270
1,180 Maryland St Econ Dev Corp MD Golf Course
Sys (Prerefunded 06/01/11)................. 8.250 06/01/28 1,390,311
1,500 Maryland St Economic Dev Corp. Sr Lien Proj
Chesapeake Bay Ser B (d)................... 5.250 12/01/31 1,518,165
</Table>
26 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MARYLAND (CONTINUED)
$1,540 Maryland St Hlth & Higher Ed Calvert Hlth
Sys........................................ 5.500% 07/01/36 $ 1,641,332
1,000 Maryland St Hlth & Higher Ed Medstar Hlth
Rfdg....................................... 5.500 08/15/33 1,061,910
3,000 Montgomery Cnty, MD Econ Dev Editorial Proj
In Ed Ser A (Acquired 09/28/98, Cost
$3,000,000) (a)............................ 6.400 09/01/28 2,709,750
2,863 Prince Georges Cnty, MD Rev (Prerefunded @
10/01/07).................................. 7.000 04/01/16 2,950,980
3,000 Prince Georges Cnty, MD Spl Oblig Spl Assmt
Woodview Ser A............................. 8.000 07/01/26 3,087,060
1,000 Westminster, MD Econ Dev Carroll Lutheran
Vlg Ser A.................................. 6.000 05/01/24 1,064,080
1,500 Westminster, MD Econ Dev Carroll Lutheran
Vlg Ser A.................................. 6.250 05/01/34 1,603,650
--------------
24,983,928
--------------
MASSACHUSETTS 1.9%
1,000 Massachusetts St Dev Fin Agy Briarwood Ser
B (Prerefunded @ 12/01/10)................. 8.000 12/01/22 1,171,010
250 Massachusetts St Dev Fin Agy Rev Evergreen
Ctr Inc.................................... 5.000 01/01/24 248,410
500 Massachusetts St Dev Fin Agy Rev Evergreen
Ctr Inc.................................... 5.500 01/01/35 511,775
735 Massachusetts St Dev Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 07/27/00, Cost
$733,600) (Prerefunded @ 06/01/08) (a)..... 7.750 06/01/18 794,035
1,880 Massachusetts St Dev Fin Agy Rev Hillcrest
Ed Ctr Inc................................. 6.375 07/01/29 1,907,805
2,890 Massachusetts St Dev Fin Agy Rev Hlthcare
Fac Alliance Ser A......................... 7.100 07/01/32 3,018,605
1,000 Massachusetts St Dev Fin Agy Rev MCHSP
Human Svc Providers Ser A (Prerefunded @
07/01/10).................................. 8.000 07/01/20 1,152,210
3,650 Massachusetts St Dev Fin Agy Rev New
England Ctr For Children................... 6.000 11/01/19 3,769,829
3,100 Massachusetts St Hlth & Ed Civic Invt Ser
B.......................................... 9.150 12/15/23 3,821,122
891 Massachusetts St Hlth & Ed Nichols College
Issue Ser C................................ 6.000 10/01/17 945,707
1,000 Massachusetts St Hlth & Ed Northrn
Berkshire Hlth Ser B....................... 6.250 07/01/24 1,065,890
1,865 Massachusetts St Indl Fin Agy Assisted
Living Fac Rev Marina Bay LLC Proj (AMT)
(Prerefunded @ 12/01/07)................... 7.500 12/01/27 1,966,139
</Table>
See Notes to Financial Statements 27
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
$ 955 Massachusetts St Indl Fin Agy Assisted
Living Fac Rev Newton Grp Pptys LLC Proj
(AMT) (Prerefunded @ 09/01/07)............. 8.000% 09/01/27 $ 1,017,056
515 Massachusetts St Indl Fin Agy Rev First Mtg
GF/Pilgrim Inc Proj........................ 6.500 10/01/15 505,055
2,000 Massachusetts St Indl Fin Agy Rev First Mtg
GF/Pilgrim Inc Proj........................ 6.750 10/01/28 1,914,080
1,940 Massachusetts St Indl Fin Agy Rev First Mtg
Reeds Landing Proj (c)..................... 7.100/7.350 10/01/28 1,908,223
2,130 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/98, Cost
$2,130,000) (Prerefunded @ 06/01/08) (a)... 6.375 06/01/18 2,254,328
220 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/98, Cost
$220,000) (Escrowed to Maturity) (a)....... 6.200 06/01/08 228,118
2,800 Massachusetts St Indl Fin Agy Rev Swr Fac
Res Ctl Composting (Acquired 08/10/89, Cost
$2,800,000) (AMT) (a)...................... 9.250 06/01/10 2,809,884
--------------
31,009,281
--------------
MICHIGAN 3.0%
2,500 Chelsea, MI Econ Dev Corp Rev Utd Methodist
Retirement Rfdg............................ 5.400 11/15/27 2,524,950
9,060 Detroit, MI Wtr Supply Sys Rev Drivers Ser
1443 (Inverse Fltg) (Acquired 08/07/06,
Cost $10,808,399) (FSA Insd) (a) (b)....... 7.824 07/01/14 11,458,997
835 Detroit, MI Loc Dev Fin Auth Tax Increment
Sub Ser C (Acquired 09/08/97, Cost
$835,000) (a).............................. 6.850 05/01/21 854,831
1,000 Gaylord, MI Hosp Fin Auth Ltd Oblig Rev
Otsego Mem Hosp Rfdg....................... 6.500 01/01/31 1,042,630
1,700 Hillsdale, MI Hosp Fin Hillsdale Cmnty Hlth
Ctr........................................ 5.000 05/15/13 1,703,706
4,000 Kent Hosp Fin Auth MI Rev Metro Hosp Proj
Ser A...................................... 6.250 07/01/40 4,457,200
2,390 Meridian, MI Econ Dev Corp Ltd Oblig Rev
First Mtg Burcham Hills Ser A Rfdg......... 7.500 07/01/13 2,440,214
3,430 Meridian, MI Econ Dev Corp Ltd Oblig Rev
First Mtg Burcham Hills Ser A Rfdg......... 7.750 07/01/19 3,502,613
3,045 Michigan St Hosp Fin Auth Rev Hosp Pontiac
Osteopathic Ser A Rfdg..................... 6.000 02/01/14 3,045,731
1,500 Michigan St Hosp Fin Auth Rev Hosp Pontiac
Osteopathic Ser A Rfdg..................... 6.000 02/01/24 1,500,600
2,000 Michigan St Hosp Fin Auth Rev Presbyterian
Vlg Rfdg................................... 5.500 11/15/35 2,088,640
</Table>
28 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MICHIGAN (CONTINUED)
$3,345 Michigan St Hosp Fin Auth Rev Rols RR II R
588CE (Inverse Fltg) (Acquired 06/23/06,
Cost $3,593,266) (a)....................... 9.280% 11/15/46 $ 4,060,964
5,165 Wayne Cnty, MI Arpt Auth Rev Rols RR II R
352 (Inverse Fltg) (Acquired 04/05/05, Cost
$11,112,797) (AMT) (MBIA Insd) (a)......... 9.226 12/01/24 6,703,344
3,900 Wenonah Pk Ppty Inc Bay City Hotel Rev
Bd......................................... 7.500 04/01/33 3,606,213
--------------
48,990,633
--------------
MINNESOTA 4.6%
700 Aitkin, MN Hlthcare Facs Rev Ref Riverwood
Hlthcare Ctr............................... 5.500 02/01/24 715,848
2,540 Aitkin, MN Hlthcare Facs Rev Ref Riverwood
Hlthcare Ctr............................... 5.600 02/01/32 2,603,449
2,000 Aitkin, MN Hlth Fac Rev Riverwood Hlthcare
Ctr Proj (Prerefunded @ 02/01/11).......... 7.750 02/01/31 2,315,740
1,000 Cambridge, MN Hsg & Hlthcare Fac Rev
Grandview West Proj Ser B.................. 6.000 10/01/33 1,003,060
2,000 Carlton, MN Hlth & Hsg Fac Inter Faith
Social Svc Inc Proj (Prerefunded @
04/01/10).................................. 7.500 04/01/19 2,257,440
2,000 Carlton, MN Hlth & Hsg Fac Inter Faith
Social Svc Inc Proj (Prerefunded @
04/01/10).................................. 7.750 04/01/29 2,283,180
2,700 Carlton, MN Hlthcare & Hsg Fac Rev Inter
Faith Care Ctr Proj Rfdg................... 5.700 04/01/36 2,727,810
2,250 Cuyuna Range Hosp Dist MN Hlth Fac Gross
Rev........................................ 5.500 06/01/35 2,293,312
790 Duluth, MN Econ Dev Auth Hlthcare Fac Rev
Saint Lukes Hosp........................... 6.000 06/15/12 807,972
1,500 Duluth, MN Econ Dev Auth Hlthcare Fac Rev
Saint Lukes Hosp........................... 7.250 06/15/32 1,612,530
2,000 Glencoe, MN Hlthcare Fac Rev (Prerefunded @
04/01/11).................................. 7.500 04/01/31 2,305,860
3,520 Minneapolis & St Paul, MN Metro Drivers
Arpt Commn Arpt Rev (Inverse Fltg)
(Acquired 05/12/06, Cost $3,931,418) (AMT)
(AMBAC Insd) (a) (b)....................... 7.733 01/01/13 4,266,099
1,400 Minneapolis, MN Student Hsg Rev Riverton
Cmnty Hsg Proj Ser A....................... 5.600 08/01/26 1,402,954
3,100 Minneapolis, MN Student Hsg Rev Riverton
Cmnty Hsg Proj Ser A....................... 5.700 08/01/40 3,106,510
1,000 Minneapolis, MN Tax Increment Rev Ivy Tower
Proj....................................... 5.700 02/01/29 1,021,480
900 Minnesota Agric & Econ Dev Brd Rev Hlthcare
Benedictine Proj Ser A..................... 5.500 08/01/23 918,000
875 Minnesota Agric & Econ Dev Brd Rev Hlthcare
Benedictine Proj Ser A..................... 5.750 02/01/30 893,769
</Table>
See Notes to Financial Statements 29
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MINNESOTA (CONTINUED)
$3,770 Moorhead, MN Sr Hsg Rev Sheyenne Crossing
Proj....................................... 5.650% 04/01/41 $ 3,787,304
875 New Ulm, MN Economic Dev Auth Ref Hadc
Ridgeway Proj Ser A........................ 5.750 06/01/28 886,279
2,150 New Ulm, MN Economic Dev Auth Ref Hadc
Ridgeway Proj Ser A........................ 6.000 06/01/41 2,182,487
2,500 Northwest MN Multi-Cnty Pooled Hsg Pgm A
Rfdg....................................... 6.250 07/01/40 2,535,850
1,500 Oakdale, MN Rev Sr Hsg Oak Meadows Proj
Rfdg....................................... 6.250 04/01/34 1,571,340
1,100 Pine City, MN Lease Rev Lakes Intl Language
Academy Ser A.............................. 6.250 05/01/35 1,115,356
2,000 Prior Lake MN Sr Hsg Rev Shepards Path Ser
B.......................................... 5.750 08/01/41 2,020,480
2,000 Prior Lake MN Sr Hsg Rev Shepards Path Ser
B.......................................... 5.700 08/01/36 2,043,640
1,425 Ramsey, MN Lease Rev Pact Charter Sch Proj
Ser A...................................... 6.750 12/01/33 1,534,383
1,500 Saint Cloud, MN Hsg & Redev Auth Sterling
Heights Apt Proj (AMT)..................... 7.550 04/01/39 1,590,090
1,000 Saint Paul, MN Hsg & Redev Auth Higher
Ground Academy Ser A Rfdg.................. 6.625 12/01/23 1,028,990
5,000 Saint Paul, MN Hsg & Redev Auth Hosp Rev
Hlth East Proj............................. 6.000 11/15/35 5,530,800
2,185 Saint Paul, MN Hsg & Redev Auth Lease Rev
Hope Cmnty Academy Proj A.................. 6.250 12/01/33 2,255,969
2,295 Saint Paul, MN Hsg & Redev Auth LSE Rev
Rfdg....................................... 6.750 01/01/35 1,633,856
1,000 Saint Paul, MN Hsg & Redev Cmnty of Peace
Academy Proj Ser A......................... 7.875 12/01/30 1,107,260
2,250 Saint Paul, MN Port Auth Hotel Fac Rev
Radisson Kellogg Proj Ser 2 Rfdg
(Prerefunded @ 08/01/08)................... 7.375 08/01/29 2,462,670
1,250 Saint Paul, MN Port Auth Lease Rev Hltheast
Midway Campus 03 Ser A..................... 5.875 05/01/30 1,283,825
700 Saint Paul, MN Port Auth Lease Rev Hltheast
Midway Campus 03 Ser B..................... 6.000 05/01/30 720,286
1,000 Shakopee, MN Hlthcare Saint Francis Regl
Med Ctr.................................... 5.250 09/01/34 1,044,260
2,355 St Louis Park MN Rev Ref Roitenberg Family
Pj......................................... 5.700 08/15/41 2,391,597
400 St Paul, MN Hsg & Redev Auth Hmong Academy
Proj Ser A................................. 5.750 09/01/26 401,328
1,000 St Paul, MN Hsg & Redev Auth Hmong Academy
Proj Ser A................................. 6.000 09/01/36 1,007,750
</Table>
30 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MINNESOTA (CONTINUED)
$1,000 Vadnais Heights, MN Lease Rev Agric & Food
Sciences Ser A............................. 6.375% 12/01/24 $ 1,017,100
1,000 Vadnais Heights, MN Lease Rev Agric & Food
Sciences Ser A............................. 6.600 12/01/34 1,015,040
1,450 Winona, MN Hlthcare Winona Hlth Ser A...... 6.000 07/01/34 1,583,864
--------------
76,286,817
--------------
MISSISSIPPI 0.0%
615 Mississippi Bus Fin Corp (AMT)............. 7.250 07/01/34 674,507
--------------
MISSOURI 3.1%
1,500 Carthage, MO Hosp Rev...................... 5.875 04/01/30 1,524,555
8,500 Carthage, MO Hosp Rev...................... 6.000 04/01/38 8,613,560
1,250 Cole Cnty, MO Indl Dev Auth Sr Living Fac
Rev Lutheran Svc Heisinger Proj............ 5.500 02/01/35 1,315,663
910 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg (Prerefunded 10/01/11).... 6.125 10/01/21 1,031,267
960 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg (Prerefunded 10/01/12).... 7.000 10/01/21 1,113,686
1,400 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj........................... 5.000 04/01/17 1,381,450
120 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj (Escrowed to Maturity).... 7.250 04/01/07 122,032
3,095 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj (Prerefunded @
04/01/07).................................. 7.625 04/01/17 3,213,879
209 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj (Prerefunded @
04/01/07).................................. 7.625 04/01/18 217,028
3,000 Joplin, MO Indl Dev Auth Hlth Fac Rev
Freeman Hlth Sys Proj...................... 5.500 02/15/29 3,206,610
2,000 Kansas City, MO Indl Dev Auth First Mtg
Bishop Spencer Ser A....................... 6.250 01/01/24 2,102,320
1,500 Kansas City, MO Indl Dev Auth First Mtg
Bishop Spencer Ser A....................... 6.500 01/01/35 1,586,070
976 Kansas City, MO Indl Dev Auth Multi-Family
Hsg Rev Brentwood Manor Apt Proj Ser B
(AMT)...................................... 7.250 10/15/38 1,016,709
3,000 Kansas City, MO Indl Dev Plaza Lib Proj.... 5.900 03/01/24 3,024,180
1,793 Kansas City, MO Multi-Family Hsg Rev
Northwoods Apts Proj Ser A (AMT)........... 6.450 05/01/40 1,880,983
2,150 Missouri St Hlth & Ed Fac Rev Drivers Ser
362 (Inverse Fltg) (Acquired 07/21/03, Cost
$2,331,750) (a)............................ 8.831 05/15/11 2,727,189
3,195 Missouri St Hlth & Ed Fac Rev Drivers Ser
847 (Inverse Fltg) (Acquired 04/05/05, Cost
$3,435,540) (a) (b)........................ 7.825 11/15/12 4,010,460
2,220 Nevada, MO Hosp Rev Neveda Regional Med
Ctr........................................ 6.750 10/01/22 2,372,958
</Table>
See Notes to Financial Statements 31
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MISSOURI (CONTINUED)
$2,750 Saint Joseph, MO Indl Dev Auth Hlthcare Rev
Living Cmnty Saint Joseph Proj............. 7.000% 08/15/32 $ 2,792,515
500 Saint Joseph, MO Indl Dev Auth Tax
Increment Rev Shoppes at North Vlg Proj Ser
A.......................................... 5.100 11/01/19 502,710
1,000 Saint Joseph, MO Indl Dev Auth Tax
Increment Rev Shoppes at North Vlg Proj Ser
A.......................................... 5.500 11/01/27 1,017,900
4,820 Saline Cnty, MO Indl Dev Auth Hlth Fac Rev
(Acquired 01/12/99, Cost $4,727,371) (a)... 6.500 12/01/28 4,975,782
1,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 6.000 06/01/15 1,166,980
--------------
50,916,486
--------------
MONTANA 0.2%
1,000 Montana Fac Fin Auth Rev Sr Living St Johns
Lutheran Ser A............................. 6.000 05/15/25 1,029,380
2,000 Montana Fac Fin Auth Rev Sr Living St Johns
Lutheran Ser A............................. 6.125 05/15/36 2,078,520
--------------
3,107,900
--------------
NEVADA 0.5%
3,500 Clark Cnty, NV Indl Dev Southwest Gas Corp
Proj Ser D1 (AMT) (FGIC Insd).............. 5.250 03/01/38 3,706,850
3,000 Henderson, NV Hlthcare Fac Rev Catholic
Hlthcare West Ser A........................ 5.625 07/01/24 3,243,150
1,000 Las Vegas, NV Loc Impt Bds Spl Impt Dist No
607........................................ 6.000 06/01/19 1,032,980
--------------
7,982,980
--------------
NEW HAMPSHIRE 0.6%
2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev
Havenwood-Heritage Heights................. 7.350 01/01/18 2,045,960
2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev
Havenwood-Heritage Heights................. 7.450 01/01/25 2,046,140
1,690 New Hampshire Hlth & Ed Fac Auth Rev
Huntington At Nashua Ser A................. 6.875 05/01/33 1,803,044
1,500 New Hampshire Hlth & Ed Fac Hlthcare Sys
Covenant Hlth.............................. 5.500 07/01/34 1,594,650
1,500 New Hampshire Hlth & Ed Fac Speare Mem
Hosp....................................... 5.875 07/01/34 1,578,975
1,000 New Hampshire St Business Fin Auth Rev
Alice Peck Day Hlth Sys Ser A.............. 6.875 10/01/19 1,057,660
--------------
10,126,429
--------------
NEW JERSEY 3.6%
1,000 Middlesex Cnty, NJ Pollutn Ctl Pollutn Ctl
Amerada Rfdg............................... 6.050 09/15/34 1,079,130
2,000 New Jersey Econ Dev Auth Cedar Crest Vlg
Inc Fac Ser A.............................. 7.000 11/15/16 2,072,480
2,500 New Jersey Econ Dev Auth Econ Dev Rev Utd
Methodist Homes Ser A-1.................... 6.000 07/01/18 2,706,425
</Table>
32 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW JERSEY (CONTINUED)
$2,000 New Jersey Econ Dev Auth First Mtg
Franciscan Oaks Proj....................... 5.700% 10/01/17 $ 2,049,560
1,000 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.000 11/15/15 1,125,600
1,000 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.125 11/15/18 1,064,050
1,440 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.125 11/15/23 1,617,984
710 New Jersey Econ Dev Auth Rev First Mtg
Lions Gate Proj A.......................... 5.750 01/01/25 732,990
1,230 New Jersey Econ Dev Auth Rev First Mtg
Lions Gate Proj A.......................... 5.875 01/01/37 1,271,119
1,000 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06).................................. 8.500 11/01/16 1,024,250
1,500 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06).................................. 8.625 11/01/25 1,536,540
1,365 New Jersey Econ Dev Auth Rev Kullman Assoc
Proj Ser A (AMT)........................... 6.125 06/01/18 1,315,218
2,000 New Jersey Econ Dev Auth Rev Sr Living Fac
Esplanade Bear (AMT)....................... 7.000 06/01/39 1,436,000
1,500 New Jersey Econ Dev Auth Rev Sr Mtg Arbor
Glan Proj Ser A............................ 6.000 05/15/28 1,545,585
3,500 New Jersey Econ Dev Auth Utd Methodist
Homes NJ Oblig............................. 5.750 07/01/29 3,578,365
900 New Jersey Hlthcare Fac Fin Auth Rev Avalon
at Hillsborough Ser A (AMT)................ 6.375 07/01/25 913,491
575 New Jersey Hlthcare Fac Fin Auth Rev Avalon
at Hillsborough Ser A (AMT)................ 6.625 07/01/35 583,683
3,225 New Jersey Hlthcare Fac Fin Auth Rev Cap
Hlth Sys Oblig Grp Ser A................... 5.375 07/01/33 3,363,740
645 New Jersey Hlthcare Fac Fin Auth Rev
Raritan Bay Med Ctr Issue Rfdg............. 7.250 07/01/14 664,221
3,000 New Jersey Hlthcare Fac Fin Inst Inc Cherry
Hill Proj.................................. 8.000 07/01/27 3,081,510
970 New Jersey St Ed Fac Auth Rev Felician
College of Lodi Ser D (Acquired 11/07/97,
Cost $1,275,000) (a)....................... 7.375 11/01/22 1,009,954
6,000 New Jersey St Trans Tr Fd Auth Rites Pa
1381 (Inverse Fltg) (Acquired 05/30/06,
Cost $9,220,200) (a) (b)................... 11.630 12/15/22 10,800,780
3,535 Tobacco Settlement Fin Corp NJ............. 6.750 06/01/39 3,981,188
</Table>
See Notes to Financial Statements 33
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW JERSEY (CONTINUED)
$5,000 Tobacco Settlement Fin Corp NJ............. 6.250% 06/01/43 $ 5,467,500
5,000 Tobacco Settlement Fin Corp NJ Asset Bkd... 6.000 06/01/37 5,346,900
--------------
59,368,263
--------------
NEW MEXICO 0.5%
4,060 Albuquerque, NM Retirement Fac Rev La Vida
Llena Proj Ser B Rfdg...................... 6.600 12/15/28 4,258,534
1,505 Cabezon Pub Impt Dist NM Spl Levg Rev...... 6.000 09/01/24 1,565,095
1,005 New Mexico Hsg Auth Region lll Sr Brentwood
Gardens Apt Ser A (AMT).................... 6.850 12/01/31 1,088,264
750 Ventana West Pub Impt Dist NM.............. 6.875 08/01/33 804,765
--------------
7,716,658
--------------
NEW YORK 7.5%
960 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van
Allen Proj Ser A........................... 6.875 06/01/39 985,642
1,000 Brookhaven, NY Indl Dev Agy Mem Hosp Med
Ctr Inc Ser A.............................. 8.125 11/15/20 1,101,980
1,400 Brookhaven, NY Indl Dev Agy Sr Residential
Hsg Rev Woodcrest Estates Fac Ser A
(AMT)...................................... 6.375 12/01/37 1,450,246
3,415 Dutchess Cnty, NY Indl Dev Agy Saint
Francis Hosp Ser A Rfdg.................... 7.500 03/01/29 3,768,692
1,700 East Rochester, NY Hsg Auth Rev Ref Sr
Living Woodland Vlg Proj................... 5.500 08/01/33 1,731,739
2,000 Erie Cnty, NY Indl Dev Agy Rev Orchard Pk
CCRC Inc Proj Ser A........................ 6.000 11/15/36 2,116,520
1,975 Monroe Cnty, NY Indl Dev Agy Woodland Vlg
Proj (Prerefunded @ 11/15/10).............. 8.000 11/15/15 2,252,843
43,175 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A...................... 6.250 03/01/15 45,943,381
15,400 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A...................... 6.500 03/01/35 16,445,352
4,445 New York City Indl Dev Agy Rev Rols RR II R
523CE (Inverse Fltg) (Acquired 03/03/06,
Cost $5,310,353) (a) (b)................... 12.759 03/01/15 5,585,143
2,975 New York City Ser A........................ 7.000 08/01/07 3,027,330
3,270 New York, NY City Indl Dev Agy Drivers Ser
146 (Inverse Fltg) (Acquired 09/07/06, Cost
$3,845,847) (MBIA Insd) (a)................ 7.824 09/01/14 4,002,545
2,500 New York, NY City Mun Fin Auth Rites Pa
1403 Ser B (Inverse Fltg) (Acquired
08/28/06, Cost $2,862,650) (a) (b)......... 8.214 06/15/36 2,980,400
2,500 New York, NY City Mun Fin Auth Rites Pa
1403 Ser A (Inverse Fltg) (Acquired
08/28/06, Cost $2,862,650) (a) (b)......... 8.214 06/15/38 2,980,400
2,500 New York St Energy Resh & Dev Auth Gas Fac
Rev (Inverse Fltg)......................... 8.700 04/01/20 2,787,100
</Table>
34 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,950 Saratoga Cnty, NY Indl Dev Agy Sr Hsg Rev
Highpointe at Malta Proj Ser A............. 6.875% 06/01/39 $ 2,016,144
1,000 Suffolk Cnty, NY Gurwin Jewish Phase II.... 6.700 05/01/39 1,089,620
1,000 Suffolk Cnty, NY Indl Dev Agy Continuing
Care Retirement Cmnty Rev (Prerefunded @
11/01/09).................................. 7.250 11/01/28 1,115,700
2,975 Suffolk Cnty, NY Indl Dev Agy Eastn Long Is
Hosp Assoc Ser A........................... 7.750 01/01/22 3,182,655
1,340 Suffolk Cnty, NY Indl Dev Agy Indl Dev Rev
Spellman High Voltage Fac Ser A (AMT)...... 6.375 12/01/17 1,347,276
4,000 Suffolk Cnty, NY Indl Dev Agy Medford
Hamlet Asstd Living Proj (AMT)............. 6.375 01/01/39 4,066,320
1,445 Suffolk Cnty, NY Indl Dev Agy Peconic
Landing Ser A.............................. 8.000 10/01/20 1,613,689
1,000 Syracuse, NY Indl Dev Agy Rev First Mtg
Jewish Home Ser A.......................... 7.375 03/01/31 1,077,800
5,000 Tsasc Inc NY Rols RR II R 513CE 2 (Inverse
Fltg) (Acquired 03/01/06, Cost $4,936,300)
(a)........................................ 5.967 06/01/26 5,207,000
2,700 Ulster Cnty, NY Indl Dev Agy Civic Fac Rev
Benedictine Hosp Proj Ser A................ 6.450 06/01/24 2,712,852
2,315 Utica, NY Indl Dev Agy Civic Utica College
Civic Fac.................................. 6.750 12/01/21 2,537,171
1,000 Westchester Cnty, NY Indl Dev Hebrew Hosp
Sr Hsg Inc Ser A........................... 7.375 07/01/30 1,077,300
--------------
124,202,840
--------------
NORTH CAROLINA 0.3%
2,000 North Carolina Med Care Commn First Mtg Utd
Methodist Homes (Prerefunded @ 10/01/09)... 7.000 10/01/17 2,191,740
2,600 North Carolina Med Care Commn Retirement
Fac Rev First Mtg Ser A 05................. 5.500 10/01/35 2,663,882
--------------
4,855,622
--------------
NORTH DAKOTA 0.2%
2,000 Grand Forks, ND Sr Hsg Rev Spl Term 4000
Vly Square Proj............................ 6.250 12/01/34 2,008,280
935 Grand Forks, ND Sr Hsg Rev Spl Term 4000
Vly Square Proj............................ 6.375 12/01/34 940,283
--------------
2,948,563
--------------
OHIO 3.4%
10,200 Adams Cnty Hosp Fac Impt Rev Adams Cnty
Hosp Proj.................................. 6.500 09/01/36 10,511,610
5,000 Athens Cnty, OH Hosp Fac Rev Impt O'Bleness
Mem Ser A Rfdg............................. 7.125 11/15/33 5,457,350
</Table>
See Notes to Financial Statements 35
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
OHIO (CONTINUED)
$3,000 Cleveland-Cuyahoga Cnty, OH Spl Assmt/ Tax
Increment.................................. 7.000% 12/01/18 $ 3,220,620
1,000 Cuyahoga Cnty, OH Hlthcare Fac Franciscan
Cnty OH Inc Proj Ser C..................... 6.250 05/15/32 1,021,440
5,000 Cuyahoga Cnty, OH Rev Ser A Rfdg........... 6.000 01/01/32 5,561,500
1,760 Dayton, OH Spl Fac Rev Air Freight Cargo
Day LLC Proj (AMT)......................... 6.300 04/01/22 1,786,083
7,510 Erie Cnty, OH Hosp Fac Rev Firelands Regl
Med Ctr Ser A.............................. 5.625 08/15/32 8,019,554
5,955 Franklin Cnty, OH Hlthcare Fac Rev Impt
Lutheran Sr City Proj Rfdg (b)............. 6.125 12/15/28 5,900,869
2,600 Franklin Cnty, OH Hlthcare Fac Rev Impt OH
Presbyterian Svc Ser A..................... 5.125 07/01/35 2,670,850
1,500 Lucas Cnty, OH Hlthcare & Impt Sunset
Retirement Rfdg............................ 6.500 08/15/20 1,613,475
750 Lucas Cnty, OH Port Auth Rev Saint Mary
Woods Proj Ser A........................... 6.000 05/15/24 766,320
2,250 Lucas Cnty, OH Port Auth Rev Saint Mary
Woods Proj Ser A........................... 6.000 05/15/34 2,278,418
2,805 Madison Cnty, OH Hosp Impt Rev Madison Cnty
Hosp Proj Rfdg (Prerefunded 08/01/08)...... 6.400 08/01/28 2,929,963
4,340 Norwood, OH Tax Increment Rev Fin
Cornerstone at Norwood..................... 6.200 12/01/31 4,381,664
--------------
56,119,716
--------------
OKLAHOMA 1.8%
1,000 Citizen Potawatomi Nation, OK Ser A........ 6.500 09/01/16 1,063,310
430 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A (Escrowed to Maturity)..... 7.000 08/01/10 458,844
750 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A (Prerefunded @ 08/01/10)... 7.400 08/01/17 860,625
1,000 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A (Prerefunded @ 08/01/10)... 7.625 08/01/20 1,155,470
1,000 Norman, OK Regl Hosp Auth Hosp Rev......... 5.375 09/01/29 1,053,400
3,000 Norman, OK Regl Hosp Auth Hosp Rev......... 5.375 09/01/36 3,140,820
2,000 Oklahoma Cnty, OK Fin Auth Rev Epworth
Villa Proj Rfdg............................ 6.000 04/01/18 2,049,800
750 Oklahoma Cnty, OK Fin Auth Rev Epworth
Villa Proj Ser A Rfdg...................... 5.700 04/01/25 766,890
1,000 Oklahoma Cnty, OK Fin Auth Rev Epworth
Villa Proj Ser A Rfdg...................... 7.000 04/01/25 1,027,240
1,250 Oklahoma Cnty, OK Fin Auth Rev Epworth
Villa Proj Ser A Rfdg...................... 5.875 04/01/30 1,287,600
1,500 Oklahoma Cnty, OK Fin Auth Rev Retirement
Fac Concordia Ser A........................ 6.125 11/15/25 1,532,445
5,500 Oklahoma Cnty, OK Fin Auth Rev Retirement
Fac Concordia Ser A........................ 6.000 11/15/38 5,556,100
</Table>
36 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
OKLAHOMA (CONTINUED)
$1,065 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg (Prerefunded @
08/15/09).................................. 5.750% 08/15/12 $ 1,136,472
1,000 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg (Prerefunded @
08/15/09).................................. 5.750 08/15/15 1,067,110
4,000 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg (Prerefunded @
08/15/09).................................. 5.625 08/15/19 4,254,920
3,250 Tulsa Cnty, OK Pub Fac Auth (Prerefunded @
11/01/09) (AMBAC Insd)..................... 6.250 11/01/22 3,564,275
--------------
29,975,321
--------------
OREGON 0.8%
2,000 Clackamas Cnty, OR Hosp Fac Willamette View
Inc Proj Ser A (Prerefunded @ 11/01/09).... 7.500 11/01/29 2,242,080
2,145 Clatsop Care Ctr Hlth Dist OR Rev Sr Hsg... 6.875 08/01/28 2,190,624
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 2,578,100
4,998 Oregon St Hlth Hsg Ed & Cultural Fac Auth
(AMT)...................................... 7.250 06/01/28 5,183,807
970 Oregon St Hlth Hsg Ed Auth OR Baptist
Retirement Homes Ser A..................... 8.000 11/15/26 991,486
--------------
13,186,097
--------------
PENNSYLVANIA 4.3%
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/15 2,379,820
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/22 2,373,000
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/30 2,369,000
2,000 Allegheny Cnty, PA Indl Dev Auth Lease Rev
(AMT)...................................... 6.625 09/01/24 2,063,420
1,500 Allegheny Cnty, PA Redev Auth Pittsburgh
Mills Proj................................. 5.600 07/01/23 1,589,490
1,500 Bucks Cnty, PA Indl Dev Auth Retirement
Cmty Rev Ann's Choice Inc Fac Ser A........ 6.125 01/01/25 1,610,175
1,250 Bucks Cnty, PA Indl Dev Auth Retirement
Cmty Rev Ann's Choice Inc Fac Ser A........ 6.250 01/01/35 1,337,250
1,000 Bucks Cnty, PA Indl Dev Auth Rev First Mtg
Hlthcare Fac Chandler...................... 6.200 05/01/19 1,008,740
1,800 Bucks Cnty, PA Indl Dev Auth Rev First Mtg
Hlthcare Fac Chandler...................... 6.300 05/01/29 1,807,884
1,500 Chester Cnty, PA Hlth & Ed Fac Chester Cnty
Hosp Ser A................................. 6.750 07/01/31 1,649,985
2,000 Cumberland Cnty, PA Indl Dev Auth Rev First
Mtg Woods Cedar Run Ser A Rfdg (e) (f)..... 6.500 11/01/28 979,000
3,000 Dauphin Cnty, PA Gen Auth Rev Office & Pkg
Riverfront Office.......................... 6.000 01/01/25 2,863,770
</Table>
See Notes to Financial Statements 37
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$1,000 Fulton Cnty, PA Indl Dev Auth Hosp Rev
Fulton Cnty Med Ctr Proj................... 5.675% 07/01/31 $ 1,027,540
1,900 Fulton Cnty, PA Indl Dev Auth Hosp Rev
Fulton Cnty Med Ctr Proj................... 5.900 07/01/40 1,953,143
2,200 Indiana Cnty, PA Indl Dev Auth PSEG Pwr LLC
Proj Rfdg (AMT)............................ 5.850 06/01/27 2,322,870
1,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Ctr
Saint Anne's Home.......................... 6.625 04/01/28 1,035,240
1,200 Lehigh Cnty, PA Gen Purp Auth First Mtg
Bible Fellowship Church.................... 7.625 11/01/21 1,331,616
3,000 Lehigh Cnty, PA Gen Purp Auth Rev Good
Shepherd Group Ser A....................... 5.500 11/01/24 3,194,070
3,585 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace
Oblig Grp (b).............................. 6.200 11/01/14 3,575,751
5,500 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace
Oblig Grp Rfdg............................. 6.000 11/01/23 5,379,055
1,000 Lehigh Cnty, PA Indl Dev Auth Hlth Fac Rev
Lifepath Inc Proj.......................... 6.100 06/01/18 970,700
4,180 Montgomery Cnty, PA Higher Ed & Hlth Auth
Rev Montgomery Impt & Rfdg................. 6.875 04/01/36 4,356,856
1,085 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj.................. 6.000 02/01/21 1,154,353
4,500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj.................. 6.250 02/01/35 4,790,970
1,365 Northeastern PA Hosp & Ed Auth Hlthcare
Rev........................................ 7.125 10/01/29 1,407,479
1,690 Northeastern PA Hosp & Ed Auth Hlthcare Rev
Oakwood Ter Proj (Acquired 12/27/05, Cost
$1,690,000) (a) (b)........................ 6.500 10/01/32 1,710,787
1,500 Pennsylvania Econ Dev Fin Auth Reliant
Energy Ser A (AMT)......................... 6.750 12/01/36 1,611,930
3,000 Pennsylvania Econ Dev Fin Auth Reliant
Energy Seward Ser A (AMT).................. 6.750 12/01/36 3,223,860
980 Pennsylvania St Higher Ed Student Assn Inc
Proj Ser A................................. 6.750 09/01/32 1,070,993
2,150 Philadelphia, PA Auth Indl Dev Rev Coml Dev
Rfdg (AMT)................................. 7.750 12/01/17 2,159,654
1,925 Philadelphia, PA Hosp & Higher Ed Fac Auth
Rev Centralized Comp Human Svc Ser A....... 6.125 01/01/13 1,917,377
1,500 Scranton Lackawanna, PA Hlth & Welfare Auth
Rev Rfdg (Prerefunded @ 01/15/07).......... 7.250 01/15/17 1,544,295
</Table>
38 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$2,000 Scranton Lackawanna, PA Hlth & Welfare Auth
Rev Rfdg (Prerefunded @ 01/15/07).......... 7.350% 01/15/22 $ 2,059,640
1,500 Westmoreland Cnty, PA Indl Dev Hlthcare Fac
Redstone Ser B (Prerefunded @ 11/15/10).... 8.000 11/15/23 1,741,650
--------------
71,571,363
--------------
RHODE ISLAND 0.3%
1,825 Rhode Island St Econ Dev Corp Rev Oblig
Providence Pl.............................. 7.250 07/01/20 1,879,458
3,000 Tobacco Settlement Fin Corp RI Asset Bkd
Ser A...................................... 6.000 06/01/23 3,176,670
--------------
5,056,128
--------------
SOUTH CAROLINA 1.5%
2,500 Lancaster Cnty, SC Assmt Rev Edenmoor Impt
Dist Ser A (Acquired 05/19/06, Cost
$2,500,000) (a)............................ 5.750 12/01/37 2,656,575
1,700 Lancaster Cnty, SC Assmt Rev Sun City
Carolina Lakes Impt........................ 5.450 12/01/37 1,713,906
1,000 Myrtle Beach Sc Tax Increment Myrtle Beach
Air Force Base Ser A (Acquired 09/29/06,
Cost $997,500) (a) (d)..................... 5.250 11/01/26 997,500
1,250 Myrtle Beach Sc Tax Increment Myrtle Beach
Air Force Base Ser A (Acquired 09/29/06,
Cost $1,245,313) (a) (d)................... 5.300 11/01/35 1,245,313
3,000 South Carolina Jobs Econ Dev Auth Econ Dev
Rev Westminster Impt & Rfdg................ 5.375 11/15/30 3,021,300
1,570 South Carolina Jobs Econ Dev Auth Hosp Fac
Rev Palmetto Hlth Alliance Ser A Impt &
Rfdg....................................... 6.250 08/01/31 1,758,510
1,000 South Carolina Jobs Econ Dev Episcopal Home
Still Proj A............................... 6.000 05/15/17 1,028,650
2,000 South Carolina Jobs Econ Dev First Mtg
Westley Com Proj........................... 7.750 10/01/24 2,307,980
4,500 South Carolina Jobs Econ Dev First Mtg
Westley Com Proj........................... 8.000 10/01/31 5,230,530
2,250 South Carolina Jobs Econ Dev Ref First Mtg
Wesley Commons (d)......................... 5.300 10/01/36 2,258,663
3,000 Tobacco Settlement Rev Mgmt Auth SC Tob
Settlement Rev Ser B....................... 6.375 05/15/28 3,236,010
--------------
25,454,937
--------------
SOUTH DAKOTA 0.8%
1,010 Keystone, SD Econ Dev Rev Wtr Quality Mgmt
Corp Ser A (AMT)........................... 6.000 12/15/18 1,015,080
4,080 Sioux Falls, SD Multi-Family Rev Ref Hsg
Inn on Westport Proj Ser A1 (Acquired
08/04/06, Cost $4,080,000) (a)............. 6.000 03/01/40 4,142,220
</Table>
See Notes to Financial Statements 39
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
SOUTH DAKOTA (CONTINUED)
$1,035 Sioux Falls, SD Multi-Family Rev Ref Hsg
Inn on Westport Sub B (Acquired 08/04/06,
Cost $1,035,000) (a) (b)................... 7.500% 03/01/40 $ 1,044,626
5,415 Sioux Falls, SD Multi-Family Hsg Inn
Westport Proj Ser A (Acquired 01/26/04 to
04/27/05, Cost $5,511,293) (Prerefunded @
12/01/08) (a).............................. 7.500 12/01/34 5,609,832
1,050 South Dakota St Hlth & Ed Fac Auth Rev
Sioux Vly Hosp & Hlth Sys Ser A............ 5.250 11/01/34 1,101,986
--------------
12,913,744
--------------
TENNESSEE 2.9%
3,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg
(MBIA Insd) (h)............................ 7.750 07/01/29 3,644,670
1,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
First Mtg Mtn States Hlth Ser A Rfdg....... 7.500 07/01/33 1,171,800
4,950 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
Rites PA 1351 (Inverse Fltg) (Acquired
02/02/06, Cost $5,313,231) (a) (b)......... 6.902 07/01/36 5,599,242
1,000 Johnson City, TN Hlth & Ed Fac Brd
Retirement Fac Rev Appalachian Christian
Vlg Proj Ser A............................. 6.250 02/15/32 1,044,290
800 Shelby Cnty, TN Hlth Edl Hsg Vlg at
Germantown................................. 6.250 12/01/34 816,816
1,750 Shelby Cnty, TN Hlth & Ed Germantown Vlg
Ser A...................................... 7.000 12/01/23 1,856,855
1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg
Ser A...................................... 7.250 12/01/34 1,068,150
1,000 Shelby Cnty, TN Hlth Ed & Hsg Fac Brd Rev
Trezavant Manor Proj Ser A................. 5.625 09/01/26 1,018,830
4,500 Shelby Cnty, TN Hlth Ed & Hsg Fac Brd Rev
Trezavant Manor Proj Ser A................. 5.750 09/01/37 4,595,265
4,920 Sullivan Cnty, TN Hlth Ed & Hsg Fac Brd
Rev........................................ 8.410 11/01/19 5,135,890
10,000 Tennessee Energy Acquisition Crols RR II R
598 (Inverse Fltg) (Acquired 07/14/06, Cost
$12,374,400) (a)........................... 9.312 09/01/22 14,765,000
3,125 Tennessee Energy Acqusn Corp. Rites Pa 1395
(Inverse Fltg) (Acquired 08/09/06, Cost
$4,231,625) (a)............................ 9.155 09/01/21 4,605,813
</Table>
40 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
TENNESSEE (CONTINUED)
$2,625 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj
Ser A (Acquired 06/08/89, Cost $3,195,000)
(a)........................................ 10.000% 11/01/19 $ 2,771,554
1,160 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj
Ser B (Acquired 06/08/89, Cost $1,160,000)
(a) (b) (e) (f)............................ 10.000 11/01/20 124,050
--------------
48,218,225
--------------
TEXAS 6.0%
300 Abia Dev Corp TX Arpt Fac Rev Austin Belly
Port Dev LLC Proj Ser A (AMT).............. 6.250 10/01/08 303,762
3,000 Abia Dev Corp TX Arpt Fac Rev Austin Belly
Port Dev LLC Proj Ser A (AMT).............. 6.500 10/01/23 3,066,630
1,000 Atlanta, TX Hosp Auth Fac Rev.............. 6.700 08/01/19 1,045,850
2,035 Atlanta, TX Hosp Auth Fac Rev.............. 6.750 08/01/29 2,095,480
990 Austin-Bergstorm Landhost Enterprises Inc
TX Arpt Hotel Sr Ser A (g)................. 6.750/4.450 04/01/27 745,569
980 Bexar Cnty, TX Hsg Fin Corp Multi-Family
Hsg Rev Woodland Ridge Apt Proj Ser A
(AMT)...................................... 7.000 01/01/39 1,031,254
2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp..... 5.375 01/01/32 2,104,640
735 Comal Cnty, TX Hlth Fac Dev Hlthcare Sys
McKenna Mem Proj Ser A..................... 6.250 02/01/32 795,307
1,825 Dallas Cnty, TX Flood Ctl Dist No 1 Cap
Apprec Rfdg (Acquired 08/28/89, Cost
$660,829) (a).............................. * 08/01/11 1,407,896
3,445 Dallas Cnty, TX Flood Ctl Dist No 1 Rfdg... 7.250 04/01/32 3,612,806
4,305 Dallas Cnty, TX Flood Ctl Dist Rfdg (b).... 6.750 04/01/16 4,543,067
2,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth
Sys Ser A.................................. 7.000 09/01/25 2,739,750
3,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth
Sys Ser A.................................. 7.125 09/01/34 3,841,075
1,500 Grand Pairie, TX Hsg Fin Corp Indpt Sr
Living Ctr Rev............................. 7.500 07/01/17 1,505,970
3,000 Grand Pairie, TX Hsg Fin Corp Indpt Sr
Living Ctr Rev............................. 7.750 01/01/34 3,010,140
1,750 Houston, TX Arpt Sys Rev Sub Lien Ser A
(AMT) (FSA Insd)........................... 5.125 07/01/32 1,804,250
3,000 Houston, TX Hlth Fac Dev Corp Buckingham Sr
Living Cmnty Ser A......................... 7.125 02/15/34 3,344,460
4,440 Houston, TX Util Sys Rev Rols RR II R 537
(Inverse Fltg) (Acquired 04/03/06, Cost
$5,304,705) (MBIA Insd) (a)................ 8.802 05/15/28 5,499,473
3,750 Lower CO River Auth TX Rev Ser A Rfdg
(Inverse Fltg) (Acquired 10/20/99, Cost
$3,784,875) (FSA Insd) (a)................. 7.775 05/15/15 4,228,500
8,880 Lower CO River Auth TX Rev Ser A Rfdg
(Inverse Fltg) (Acquired 10/20/99, Cost
$9,073,939) (FSA Insd) (a)................. 7.775 05/15/14 9,994,618
</Table>
See Notes to Financial Statements 41
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$1,000 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg
Carillon Proj A Rfdg....................... 6.500% 07/01/26 $ 1,035,880
10,000 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg
Carillon Proj A Rfdg....................... 6.625 07/01/36 10,343,800
1,255 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg
Carillon Proj Ser A (Prerefunded @
07/01/09).................................. 6.500 07/01/19 1,347,054
2,245 Meadow Parc Dev Inc TX Multi-Family Rev Hsg
Meadow Parc Apt Proj....................... 6.500 12/01/30 2,290,394
2,500 Metropolitan Hlth Fac Dev Corp TX Wilson N
Jones Mem Hosp Proj........................ 7.250 01/01/31 2,588,800
2,755 Midlothian, TX Dev Auth Tax Increment
Contract Rev............................... 6.700 11/15/23 2,862,445
2,000 Midlothian, TX Dev Auth Tax Increment
Contract Rev............................... 7.875 11/15/26 2,206,260
1,500 Midlothian, TX Dev Auth Tax Increment
Contract Rev (Acquired 12/02/04, Cost
$1,500,000) (a)............................ 6.200 11/15/29 1,536,345
1,000 Richardson, TX Hosp Auth Rev Baylor &
Richardson Impt & Rfdg..................... 5.625 12/01/28 1,035,830
2,500 Tarrant Cnty, TX Cultural Ed Fac Fin Corp
Retirement Fac Northwest Sr Hsg Edgemore
Proj A..................................... 6.000 11/15/36 2,637,225
1,200 Texas St Dept Hsg & Cmnty Affairs Home Mtg
Rev (AMT) (GNMA Collateralized)............ 6.900 07/02/24 1,235,760
1,675 Texas St Pub Fin Auth Sch Excellence Ed
Proj Ser A (Acquired 12/02/04, Cost
$1,654,197) (a)............................ 7.000 12/01/34 1,829,787
1,500 Texas St Student Hsg Corp MSU Proj Midwestn
St Univ.................................... 6.500 09/01/34 1,618,365
2,950 Tomball, TX Hosp Auth Rev Hosp Tomball Regl
Hosp....................................... 6.000 07/01/29 3,073,340
1,000 Travis Cnty, TX Hlth Fac Dev Corp
Retirement Fac Rev Querencia Barton Creek
Proj....................................... 5.500 11/15/25 1,012,160
2,950 Travis Cnty, TX Hlth Fac Dev Corp
Retirement Fac Rev Querencia Barton Creek
Proj....................................... 5.650 11/15/35 2,985,636
945 Wichita Cnty, TX Hlth Fac Rolling Meadows
Fac Ser A Rfdg............................. 6.250 01/01/28 966,083
2,500 Woodhill Pub Fac Corp TX Hsg-Woodhill Apt
Proj....................................... 7.500 12/01/29 2,495,525
--------------
99,821,186
--------------
UTAH 0.2%
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (e)................................... 7.800 09/01/15 308,750
585 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (e)................................... 7.800 09/01/25 180,619
</Table>
42 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
UTAH (CONTINUED)
$1,165 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (e)................................... 8.000% 09/01/20 $ 359,694
2,355 Utah St Hsg Fin Agy Rev RHA Cmnty Svc Proj
Ser A...................................... 6.875 07/01/27 2,404,384
5 Utah St Hsg Fin Agy Single Family Mtg Mezz
A1 (AMBAC Insd)............................ 6.100 07/01/13 5,107
--------------
3,258,554
--------------
VERMONT 0.1%
1,000 Vermont Ed & Hlth Bldg Fin Agy Rev
Bennington College Proj.................... 6.625 10/01/29 1,031,750
1,000 Vermont Ed & Hlth Bldg Fin Agy Rev VT
Council Dev Mental Hlth Ser A.............. 6.000 12/15/09 1,045,370
--------------
2,077,120
--------------
VIRGINIA 2.6%
4,000 Albemarle Cnty, VA Indl Dev Auth Ed Fac Rev
Covenant Sch Inc Ser A..................... 7.750 07/15/32 4,412,240
5,000 Celebrate, VA South Cmnty Dev Celebrate VA
South Proj................................. 6.250 03/01/37 5,170,450
1,500 Farms New Kent, VA Cmnty Dev Ser B......... 5.450 03/01/36 1,508,490
1,500 Farms New Kent, VA Cmnty Dev Ser C......... 5.800 03/01/36 1,506,090
2,500 Henrico Cnty, VA Econ Dev Auth Residential
Care Fac Rev Utd Methodist Ser A Rfdg...... 6.500 06/01/22 2,681,725
3,805 Municipal Secs Tr Ctfs Ser 7019 Tr Ctf Cl B
144A (Inverse Fltg) (Acquired 09/13/06,
Cost $3,844,724) (AMT) (a)................. 7.700 01/01/33 4,019,298
1,000 New Port Cmnty Dev Auth VA Spl Assmt....... 5.500 09/01/26 1,027,650
2,500 New Port Cmnty Dev Auth VA Spl Assmt....... 5.600 09/01/36 2,569,200
4,000 Peninsula Ports Auth VA Residential Care
Fac Rev VA Baptist Homes Ser C Rfdg........ 5.400 12/01/33 4,097,200
4,000 Roanoke Cnty, VA Indl Dev Auth Glebe Inc
Ser A...................................... 6.300 07/01/35 4,069,120
8,810 Tobacco Settlement Fin Corp VA Rites PA
1341 (Inverse Fltg) (Acquired 12/07/05,
Cost $8,844,888) (a)....................... 6.748 06/01/37 9,776,281
1,700 Virginia Small Business Fin Auth Rev Indl
Dev SIL Clean Wtr Proj (AMT)............... 7.250 11/01/24 1,769,853
--------------
42,607,597
--------------
WASHINGTON 0.6%
1,000 King Cnty, WA Pub Hosp Dist No 004
Snoqualmie Vly Hosp........................ 7.250 12/01/15 1,062,050
8,830 Tobacco Settlement Auth WA Asset Bkd....... 6.625 06/01/32 9,761,212
--------------
10,823,262
--------------
WISCONSIN 1.3%
800 Baldwin, WI Hosp Rev Mtg Ser A............. 6.125 12/01/18 804,088
1,000 Baldwin, WI Hosp Rev Mtg Ser A............. 6.375 12/01/28 1,005,650
</Table>
See Notes to Financial Statements 43
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
WISCONSIN (CONTINUED)
$1,745 Milwaukee, WI Rev Sr Air Cargo (AMT)....... 6.500% 01/01/25 $ 1,883,413
1,000 Waukesha, WI Redev Auth Hsg Rev Ref Sr
Kirkland Crossings Proj.................... 5.500 07/01/31 1,013,760
1,500 Waukesha, WI Redev Auth Hsg Rev Ref Sr
Kirkland Crossings Proj.................... 5.600 07/01/41 1,530,855
750 Wisconsin Hlth & Ed Fac Eastcastle Pl Inc
Proj....................................... 6.000 12/01/24 774,098
2,000 Wisconsin St Hlth & Ed Fac Auth Rev Aurora
Hlthcare Inc Ser A......................... 5.600 02/15/29 2,076,280
3,000 Wisconsin St Hlth & Ed Fac Auth Rev
Milwaukee Catholic Home Inc Proj........... 7.500 07/01/26 3,063,090
1,000 Wisconsin St Hlth & Ed Fac Auth Rev Oakwood
Vlg Proj Ser A............................. 7.625 08/15/30 1,090,040
1,500 Wisconsin St Hlth & Ed Fac Beaver Dam Cmnty
Hosp Inc Ser A............................. 6.750 08/15/34 1,633,545
1,000 Wisconsin St Hlth & Ed Fac Divine Savior
Hlthcare Ser C (Prerefunded @ 05/01/12).... 7.500 05/01/32 1,173,800
2,000 Wisconsin St Hlth & Ed Fac Fort Hlthcare
Inc Proj................................... 6.100 05/01/34 2,220,940
1,500 Wisconsin St Hlth & Ed Fac Southwest Hlth
Ctr Ser A.................................. 6.125 04/01/24 1,550,490
1,105 Wisconsin St Hlth Edl Facs Upland Hills
Hlth Inc. Ser B (d)........................ 5.000 05/15/36 1,123,951
--------------
20,944,000
--------------
WYOMING 0.3%
4,000 Sweetwater Cnty, WY Solid Waste Disp Rev
Corp Proj Rfdg (AMT)....................... 5.600 12/01/35 4,223,640
1,500 Teton Cnty, WY Hosp Dist Hosp Saint Johns
Med Ctr.................................... 6.750 12/01/27 1,597,410
--------------
5,821,050
--------------
PUERTO RICO 1.7%
6,500 Puerto Rico Comnwlth Infrastructive Ser
B.......................................... 5.000 07/01/46 6,696,430
15,000 Puerto Rico Comwlth Hwy & Trans Auth Trans
Rev Ser K.................................. 5.000 07/01/40 15,418,650
5,000 Puerto Rico Pub Bldg Auth Rev Govt Fac Ser
I (Comwth Gtd)............................. 5.250 07/01/33 5,301,650
--------------
27,416,730
--------------
</Table>
44 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
U. S. VIRGIN ISLANDS 0.2%
$2,500 Northern Mariana Islands Ser A............. 7.375% 06/01/30 $ 2,726,875
1,000 Virgin Islands Pub Fin Auth Resr
Secd-Hovensa Refinery (AMT)................ 5.875 07/01/22 1,094,920
--------------
3,821,795
--------------
TOTAL LONG-TERM INVESTMENTS 98.7%
(Cost $1,556,337,803)..................................................... 1,635,004,805
TOTAL SHORT-TERM INVESTMENTS 0.3%
(Cost $4,200,000)......................................................... 4,200,000
--------------
TOTAL INVESTMENTS 99.0%
(Cost $1,560,537,803)..................................................... 1,639,204,805
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0%................................. 17,366,311
--------------
NET ASSETS 100.0%.......................................................... $1,656,571,116
==============
</Table>
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 18.9% of net
assets.
(b) The Fund owns 100% of the outstanding bond issuance.
(c) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(d) Securities purchased on a when-issued or delayed delivery basis.
(e) Non-income producing security.
(f) This borrower has filed for protection in federal bankruptcy court.
(g) Interest is accruing at less than the stated coupon. Coupon is shown as
stated coupon/actual coupon.
(h) All or a portion of this security has been physically segregated in
connections with open futures contracts.
See Notes to Financial Statements 45
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
CIFG--CIFG Assurance North America Inc.
Comwth Gtd--Commonwealth of Puerto Rico
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
XLCA--XL Capital Assurance Inc.
FUTURES CONTRACTS OUTSTANDING AS OF SEPTEMBER 30, 2006:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Bond Futures December 2006 (Current Notional
Value of $112,406 per contract)........................... 2,670 $(4,148,805)
===== ============
</Table>
46 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2006
<Table>
ASSETS:
Total Investments (Cost $1,560,537,803)..................... $1,639,204,805
Cash........................................................ 2,934,440
Receivables:
Interest.................................................. 27,871,170
Investments Sold.......................................... 7,988,295
Fund Shares Sold.......................................... 7,659,078
Other....................................................... 216,743
--------------
Total Assets............................................ 1,685,874,531
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 20,672,654
Fund Shares Repurchased................................... 4,500,542
Income Distributions...................................... 2,279,726
Distributor and Affiliates................................ 701,286
Investment Advisory Fee................................... 627,083
Trustees' Deferred Compensation and Retirement Plans........ 269,807
Accrued Expenses............................................ 252,317
--------------
Total Liabilities....................................... 29,303,415
--------------
NET ASSETS.................................................. $1,656,571,116
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,697,363,489
Net Unrealized Appreciation................................. 74,518,197
Accumulated Undistributed Net Investment Income............. 1,677,725
Accumulated Net Realized Loss............................... (116,988,295)
--------------
NET ASSETS.................................................. $1,656,571,116
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,338,651,418 and 98,486,244 shares of
beneficial interest issued and outstanding)............. $ 13.59
Maximum sales charge (4.75%* of offering price)......... .68
--------------
Maximum offering price to public........................ $ 14.27
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $119,950,844 and 8,830,783 shares of
beneficial interest issued and outstanding)............. $ 13.58
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $197,968,854 and 14,458,280 shares of
beneficial interest issued and outstanding)............. $ 13.69
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 47
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended September 30, 2006
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 99,511,015
------------
EXPENSES:
Investment Advisory Fee..................................... 7,504,070
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $3,217,155, $1,318,006 and $1,982,718,
respectively)............................................. 6,517,879
Shareholder Services........................................ 802,157
Custody..................................................... 212,100
Legal....................................................... 205,753
Trustees' Fees and Related Expenses......................... 51,534
Other....................................................... 697,308
------------
Total Expenses.......................................... 15,990,801
Less Credits Earned on Cash Balances.................... 46,097
------------
Net Expenses............................................ 15,944,704
------------
NET INVESTMENT INCOME....................................... $ 83,566,311
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 3,926,382
Futures................................................... (1,263,577)
------------
Net Realized Gain........................................... 2,662,805
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 32,455,361
------------
End of the Period:
Investments............................................. 78,667,002
Futures................................................. (4,148,805)
------------
74,518,197
------------
Net Unrealized Appreciation During the Period............... 42,062,836
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 44,725,641
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $128,291,952
============
</Table>
48 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
----------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 83,566,311 $ 64,808,196
Net Realized Gain/Loss............................... 2,662,805 (24,372,853)
Net Unrealized Appreciation During the Period........ 42,062,836 43,414,445
-------------- --------------
Change in Net Assets from Operations................. 128,291,952 83,849,788
-------------- --------------
Distributions from Net Investment Income:
Class A Shares..................................... (69,389,893) (55,305,117)
Class B Shares..................................... (6,164,057) (6,722,269)
Class C Shares..................................... (9,173,440) (6,404,362)
-------------- --------------
Total Distributions.................................. (84,727,390) (68,431,748)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 43,564,562 15,418,040
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 204,752,493 800,745,467
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 56,971,212 45,579,353
Cost of Shares Repurchased........................... (260,956,548) (223,389,642)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 767,157 622,935,178
-------------- --------------
TOTAL INCREASE IN NET ASSETS......................... 44,331,719 638,353,218
NET ASSETS:
Beginning of the Period.............................. 1,612,239,397 973,886,179
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of $1,677,725
and ($2,187,250), respectively).................... $1,656,571,116 $1,612,239,397
============== ==============
</Table>
See Notes to Financial Statements 49
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS A SHARES --------------------------------------------------
2006 2005 2004 2003 2002
--------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $ 13.23 $ 13.00 $13.03 $13.21 $13.25
-------- -------- ------ ------ ------
Net Investment Income..................... .71(a) .72(a) .74(a) .79 .78
Net Realized and Unrealized
Gain/Loss............................... .37 .27 -0- (.25) (.11)
-------- -------- ------ ------ ------
Total from Investment Operations............ 1.08 .99 .74 .54 .67
Less Distributions from Net Investment
Income.................................... .72 .76 .77 .72 .71
-------- -------- ------ ------ ------
NET ASSET VALUE, END OF
THE PERIOD................................ $ 13.59 $ 13.23 $13.00 $13.03 $13.21
======== ======== ====== ====== ======
Total Return (b)............................ 8.41% 7.75% 5.87% 4.21% 5.28%
Net Assets at End of the Period (In
millions)................................. $1,338.7 $1,267.3 $766.1 $560.9 $579.1
Ratio of Expenses to Average Net Assets..... .84% .86% .91% .89% .86%
Ratio of Net Investment Income to Average
Net Assets................................ 5.34% 5.41% 5.74% 6.07% 5.99%
Portfolio Turnover.......................... 99% 48% 16% 14% 14%
</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 or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months 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.
50 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS B SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $13.22 $12.99 $13.02 $13.20 $13.24
------ ------ ------ ------ ------
Net Investment Income...................... .61(a) .62(a) .65(a) .69(a) .70
Net Realized and Unrealized Gain/Loss...... .37 .27 (.01) (.25) (.12)
------ ------ ------ ------ ------
Total from Investment Operations............. .98 .89 .64 .44 .58
Less Distributions from Net Investment
Income..................................... .62 .66 .67 .62 .62
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
THE PERIOD................................. $13.58 $13.22 $12.99 $13.02 $13.20
====== ====== ====== ====== ======
Total Return (b)............................. 7.54% 7.04% 5.07% 3.42% 4.49%
Net Assets at End of the Period (In
millions).................................. $120.0 $144.9 $123.8 $115.6 $149.5
Ratio of Expenses to Average Net Assets...... 1.59% 1.61% 1.67% 1.64% 1.62%
Ratio of Net Investment Income to Average Net
Assets..................................... 4.58% 4.67% 5.00% 5.32% 5.23%
Portfolio Turnover........................... 99% 48% 16% 14% 14%
</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.
See Notes to Financial Statements 51
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS C SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $13.32 $13.09 $13.11 $13.20 $13.24
------ ------ ------ ------ ------
Net Investment Income...................... .61(a) .62(a) .64(a) .79(a) .70
Net Realized and Unrealized Gain/Loss...... .38 .27 .01 (.26) (.12)
------ ------ ------ ------ ------
Total from Investment Operations............. .99 .89 .65 .53 .58
Less Distributions from Net Investment
Income..................................... .62 .66 .67 .62 .62
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $13.69 $13.32 $13.09 $13.11 $$13.20
====== ====== ====== ====== ======
Total Return (b)............................. 7.55% 6.98% 5.10%(d) 4.10%(c) 4.49%
Net Assets at End of the Period (In
millions).................................. $198.0 $200.0 $ 84.0 $ 34.3 $ 38.5
Ratio of Expenses to Average Net Assets...... 1.59% 1.62% 1.65%(d) 1.64% 1.62%
Ratio of Net Investment Income to Average Net
Assets..................................... 4.59% 4.62% 4.94%(d) 6.00%(c) 5.23%
Portfolio Turnover........................... 99% 48% 16% 14% 14%
</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) 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) 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 7)
52 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006
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 seek 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 Fund offers Class A Shares, Class B Shares,
Class C Shares and Class I Shares. Each class of shares differs by its initial
sales load, contingent deferred sales charges, the allocation of class-specific
expenses and voting rights on matters affecting a single class. As of September
30, 2006, there have been no sales of Class I Shares.
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 September 30, 2006 the Fund had $15,343,221 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.
53
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 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, 2006 the Fund had an accumulated capital loss
carryforward for tax purposes of $115,213,774 which will expire according to the
following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$ 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
28,957,443................................................. September 30, 2013
24,197,373................................................. September 30, 2014
</Table>
At September 30, 2006 the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $1,560,150,208
==============
Gross tax unrealized appreciation........................... $ 90,266,347
Gross tax unrealized depreciation........................... (11,211,750)
--------------
Net tax unrealized appreciation on investments.............. $ 79,054,597
==============
</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 years ended September 30,
2006 and 2005 were as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $ 57,989 $ 1,843
Tax-exempt income......................................... 84,689,847 67,834,052
----------- -----------
$84,747,836 $67,835,895
=========== ===========
</Table>
Due to inherent differences in the recognition of income, expenses and
realized gain/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified
54
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
and appropriately reclassified on the Statement of Assets and Liabilities.
Permanent book and tax differences relating to a portion of the capital loss
carryforward expiring in the current year totaling $1,076,939 has been
reclassified from accumulated net realized loss to capital. Additionally,
permanent book and tax differences relating to the Fund's investment in other
regulated investment companies totaling $6,390 were reclassified from
accumulated undistributed net investment income to accumulated net realized
loss. Additionally, permanent book to tax accretion differences totaling
$124,534 were reclassified from accumulated undistributed net investment income
to accumulated net realized loss. A permanent book to tax difference relating to
the sale of PIK bonds totaling $5,156,978 was reclassified from accumulated
undistributed net investment income to accumulated net realized loss.
As of September 30, 2006 the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed Ordinary income............................... $ 192,687
Undistributed Tax-exempt income............................. 5,043,163
</Table>
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions, the capitalization of reorganization and restructuring costs,
gains or losses recognized for tax purposes on open futures transactions at
September 30, 2006 and post October losses of $6,025,399 which are not
recognized for tax purposes until the first day of the following fiscal year.
F. EXPENSE REDUCTIONS During the year ended September 30, 2006 the Fund's
custody fee was reduced by $46,097 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 year ended September 30, 2006 the Fund recognized expenses of
approximately $31,500 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 Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the year ended September 30, 2006
the Fund recognized expenses of approximately $183,600 representing Van Kampen
Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part
55
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
of "Legal" expenses on the Statement of Operations. Services provided pursuant
to the Accounting Services and CCO Employment agreement are reported as part of
"Other" expenses on 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 year ended
September 30, 2006 the Fund recognized expenses of approximately $672,700
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 $163,813 are included in
"Other" assets on the Statement of Assets and Liabilities at September 30, 2006.
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.
For the year ended September 30, 2006 Van Kampen, as distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $362,400 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $263,500 Sales charges do not represent expenses of the
Fund.
56
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
3. CAPITAL TRANSACTIONS
For the years ended September 30, 2006, 2005 transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A....................... 13,055,319 $ 173,891,015 46,042,142 $ 610,280,678
Class B....................... 334,366 4,446,493 3,997,568 52,841,157
Class C....................... 1,973,723 26,414,985 10,302,312 137,623,632
----------- ------------- ----------- -------------
Total Sales..................... 15,363,408 $ 204,752,493 60,342,022 $ 800,745,467
=========== ============= =========== =============
Dividend Reinvestment:
Class A....................... 3,595,933 $ 47,892,378 2,846,859 $ 37,712,082
Class B....................... 308,235 4,099,833 322,306 4,263,931
Class C....................... 371,317 4,979,001 269,962 3,603,340
----------- ------------- ----------- -------------
Total Dividend Reinvestment..... 4,275,485 $ 56,971,212 3,439,127 $ 45,579,353
=========== ============= =========== =============
Repurchases:
Class A....................... (13,939,360) $(185,299,918) (12,050,561) $(158,836,281)
Class B....................... (2,767,368) (36,807,094) (2,891,622) (38,202,420)
Class C....................... (2,899,964) (38,849,536) (1,980,028) (26,350,941)
----------- ------------- ----------- -------------
Total Repurchases............... (19,606,692) $(260,956,548) (16,922,211) $(223,389,642)
=========== ============= =========== =============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within 30 days of purchase. The redemption
fee is paid directly to the Fund. For the year ended September 30, 2006 the Fund
received redemption fees of approximately $12,300 which are reported as part of
"Cost of Shares Repurchased" on the Statement of Changes in Net Assets. The per
share impact from redemption fees paid to the fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $1,585,168,666 and $1,602,420,266,
respectively.
6. 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 may use derivative instruments for a variety of reasons, 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
57
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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.
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
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).
Transactions in future contracts for year ended September 30, 2006 are as
follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2005........................... -0-
Futures Opened.............................................. 6,940
Futures Closed.............................................. (4,270)
------
Outstanding at September 30, 2006........................... 2,670
======
</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 specific factor. As the floating rate rises, the coupon is
reduced. Conversely, as the floating rate declines, the coupon is increased. The
price of these securities may be more volatile than the price of a comparable
fixed rate security. These instruments are typically used by the Fund to enhance
the yield of the portfolio. These instruments are identified in the Portfolio of
Investments.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees 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. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $2,627,100 and $115,200
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
58
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action 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 Van Kampen 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
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal, which is located at the back of this Report.
9. 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.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The impact to the Fund's Financial
Statements, if any is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
59
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen Strategic Municipal
Income Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Strategic Municipal Income Fund (the "Fund"), including the portfolio of
investments, as of September 30, 2006, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen Strategic Municipal Income Fund at September 30, 2006, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
November 14, 2006
60
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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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
One Lincoln Street
Boston, Massachusetts 02111
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
For Federal Income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
September 30, 2006. The Fund designated 99.9% of the income distributions as a
tax exempt income distribution. In January, the Fund provides tax information
to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
61
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
62
<Table>
<Caption>
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
63
<Table>
<Caption>
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1993 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
64
<Table>
<Caption>
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1985 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing
(64) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
65
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 1985 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
66
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
</Table>
67
<Table>
<Caption>
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
</Table>
68
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen -- as well as several other
decisions by other judges in the Southern District of New York and certain other
courts that have dismissed similar complaints against other investment funds --
plaintiff in the derivative action has determined that the suit would be
unsuccessful, if pursued further. Accordingly, plaintiff has asked Judge Owen to
dismiss the action. No attorneys' fees will be paid by defendants and no
consideration will be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than December 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen Strategic Municipal Income Fund
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.
(continued on next page)
Van Kampen Strategic Municipal Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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, 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
(continued on back)
Van Kampen Strategic Municipal Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
39, 399, 539
STMI ANR 11/06
(VAN KAMPEN INVESTMENTS LOGO) RN06-03170P-Y09/06
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
California Insured Tax Free Fund performed during the 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 September 30, 2006.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I [AND R] SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUSES CONTAIN INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. 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 9/30/06
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Municipal Bond Index and the Lehman Brothers California Insured Municipal Bond
Index from 9/30/96 through 9/30/06. Class A shares, adjusted for sales charges.
(LINE GRAPH)
<Table>
<Caption>
LEHMAN BROTHERS CALIFORNIA
VAN KAMPEN CALIFORNIA INSURED MUNICIPAL BOND LEHMAN BROTHERS MUNICIPAL
INSURED TAX FREE FUND INDEX BOND INDEX
--------------------- -------------------------- -------------------------
9/96 9527 10000 10000
9653 10116 10113
9852 10333 10298
9796 10273 10255
9768 10265 10274
9846 10361 10369
9711 10191 10230
9801 10291 10316
9965 10477 10471
10079 10579 10583
10405 10958 10876
10228 10819 10774
9/97 10361 10955 10902
10425 11023 10972
10489 11096 11037
10671 11275 11197
10784 11424 11313
10768 11425 11316
10782 11414 11326
10690 11343 11275
10899 11546 11454
10949 11587 11499
10981 11614 11528
11169 11826 11706
9/98 11352 12027 11852
11306 12017 11851
11350 12071 11893
11347 12075 11923
11471 12216 12065
11418 12174 12012
11432 12210 12029
11441 12211 12059
11343 12118 11989
11133 11915 11816
11139 11945 11859
10994 11799 11764
9/99 10961 11811 11769
10726 11624 11642
10866 11765 11765
10769 11639 11678
10703 11590 11627
10914 11817 11762
11255 12136 12019
11129 11983 11948
11043 11949 11886
11394 12333 12201
11576 12517 12371
11839 12803 12561
9/00 11750 12735 12496
11853 12843 12632
11957 12944 12728
12342 13281 13042
12413 13406 13172
12416 13429 13213
12494 13537 13332
12232 13280 13187
12379 13476 13329
12444 13536 13418
12647 13765 13617
13001 14115 13842
9/01 12936 14042 13795
13078 14227 13959
12949 14126 13842
12786 13980 13711
12979 14202 13949
13138 14355 14117
12802 14010 13840
13054 14278 14111
13150 14392 14196
13254 14501 14346
13415 14672 14531
13642 14909 14705
9/02 14101 15305 15028
13677 14932 14778
13659 14911 14717
13980 15224 15028
13842 15141 14990
14059 15379 15199
14076 15409 15208
14221 15555 15309
14537 15932 15667
14349 15806 15601
13753 15207 15055
13912 15305 15167
9/03 14336 15738 15613
14275 15701 15534
14481 15873 15696
14580 16015 15826
14602 16100 15917
14910 16384 16156
14778 16292 16100
14352 15858 15719
14297 15797 15662
14369 15878 15719
14597 16096 15926
14882 16448 16245
9/04 14970 16519 16331
15153 16688 16472
14957 16539 16336
15200 16763 16535
15387 16970 16690
15292 16882 16634
15131 16751 16529
15417 17050 16790
15549 17162 16909
15641 17273 17013
15536 17178 16937
15710 17380 17108
9/05 15563 17258 16992
15457 17133 16889
15542 17242 16970
15702 17409 17116
15729 17457 17162
15858 17607 17278
15715 17469 17158
15683 17429 17153
15742 17514 17229
15646 17434 17164
15835 17686 17368
16103 17975 17626
9/06 16207 18083 17749
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 12/13/85 since 4/30/93 since 8/13/93 since 8/12/05
- ------------------------------------------------------------------------------------------------------
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 W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES
Since Inception 6.83% 6.59% 4.86% 4.86% 4.53% 4.53% 4.02%
10-year 5.46 4.95 4.90 4.90 4.70 4.70 n/a
5-year 4.61 3.60 4.34 4.08 3.86 3.86 n/a
1-year 4.14 -0.82 4.40 0.44 3.36 2.37 4.40
- ------------------------------------------------------------------------------------------------------
SEC Yield 3.33% 3.51% 2.78% 3.75%
</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.
Because Class B shares incurred lower expenses under the 12b-1 Plan than did
Class A shares for the fiscal period ended September 30, 2006, the total
operating expense ratio for Class B shares was lower and, as a result, the
performance of Class B shares was higher than that of Class A shares. There can
be no assurance that this will continue to occur in the future as the maximum
fees payable by Class B shares under the 12b-1 Plan are higher than those
payable by Class A shares.
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 years one and two and
declining to zero after year five), a contingent deferred sales charge of 1.00
percent for Class C shares in year one and combined Rule 12b-1 fees and service
fees of up to 0.25 percent for Class A shares and 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 eight 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. Class I shares are
available for purchase exclusively by investors through (i) tax-exempt
retirement plans with assets of at least
1
$1 million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least $1 million and (iii) institutional clients with assets of at least $1
million. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. 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 Lehman Brothers California Insured
Municipal Bond Index is comprised of insured CA municipal bond issues. The
indexes do not include any expenses, fees or sales charges, which would lower
performance. The indexes are unmanaged and should not be considered investments.
It is not possible to invest directly in an index. Source for index performance:
Lipper Inc.
2
Fund Report
FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
MARKET CONDITIONS
Against the backdrop of strong economic growth, good employment data and
inflationary pressures stemming from rising oil prices, the Federal Open Market
Committee (the "Fed") continued its tightening campaign during the first nine
months of the reporting period, raising the federal funds target rate six times
to 5.25 percent at the end of June. As the months progressed however, economic
growth moderated as consumer spending and housing weakened while inflation
concerns eased, prompting investors to speculate that the Fed would take a break
from rate increases. In August the Fed did pause, ending a two-year run of 17
consecutive rate increases -- the longest stretch of increases in 25 years. At
its September meeting, the Fed again kept its target rate unchanged, and
indicated that any future rate increases would be driven by the weight of
economic data.
As a result of the improved outlook for the fixed income market, yields on
longer-maturity municipal bonds fell dramatically in latter months of the
reporting year, ultimately ending at the lowest level in decades. Yields on
shorter-maturity municipal bonds, however, moved higher. Accordingly, the slope
of the municipal yield curve flattened as the spread between short-term and
long-term interest rates narrowed.
Demand for municipal bonds continued to be strong during the period. In fact,
inflows into municipal bond funds were 45 percent higher year-to-date through
September than for the same period last year, much of which went into high yield
funds. Because prevailing interest rates were still at relatively low levels,
investors increasingly sought out lower-quality, higher yielding bonds. The
increased demand for high yield bonds led this segment of the market to
considerably outperform high-grade issues. In addition, long-term bonds
continued to earn the best returns, while the short end of the curve posted the
lowest returns as Fed rate increases moved yields in this portion of the curve
higher.
Although municipal bond issuance remained brisk in the last quarter of 2005,
volume declined throughout the remaining months of the period. As of the end of
September, national municipal bond issuance was down 14 percent for 2006. The
reduced supply, coupled with growing demand, further fueled municipal bond
performance.
Consistent with the national trend, the amount of municipal issues (both insured
and uninsured) that came to market in California declined for the overall
period. The large number of refundings that took place in the state in the
previous two years contributed to the reduction in supply. In addition, the low
level of interest rates more recently has led investors to seek securities with
3
high yields, which resulted in a decline in demand for higher-quality, lower
yielding paper.
Despite the 20 percent drop in new issue supply, the State of California
remained the nation's largest issuer of municipal debt. The state's municipal
market continued to benefit from the strengthening of its credit fundamentals as
its credit rating was raised to A+ in 2006.
PERFORMANCE ANALYSIS
The fund returned 4.14 percent for the 12 months ended September 30, 2006 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmarks,
the Lehman Brothers California Insured Municipal Bond Index and the Lehman
Brothers Municipal Bond Index, returned 4.78 percent and 4.45 percent for the
period, respectively.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------
LEHMAN BROTHERS LEHMAN BROTHERS
CALIFORNIA INSURED MUNICIPAL BOND
CLASS A CLASS B CLASS C CLASS I MUNICIPAL BOND INDEX INDEX
4.14% 4.40% 3.36% 4.40% 4.78% 4.45%
- ------------------------------------------------------------------------------------------------
</Table>
The performance for the four 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.
Because Class B shares incurred lower expenses under the 12b-1 Plan than did
Class A shares for the fiscal period ended September 30, 2006, the total
operating expense ratio for Class B shares was lower and, as a result, the
performance of Class B shares was higher than that of Class A shares. There can
be no assurance that this will continue to occur in the future as the maximum
fees payable by Class B shares under the 12b-1 Plan are higher than those
payable by Class A shares.
A variety of factors contributed positively to the fund's performance during the
reporting year. Reflecting our view that Treasury rates would continue to rise,
we kept the portfolio's duration (a measure of interest-rate sensitivity) lower
than that of the Lehman Brothers California Insured Municipal Bond Index for the
first eight months of the period. This conservative positioning benefited the
fund as interest rates continued to climb as anticipated. In June, when economic
data started to weaken and it appeared that rates were done climbing, we
increased the duration of the portfolio to be more in line with the Lehman
Brothers California Insured Municipal Bond Index. This less-defensive
positioning also contributed positively to fund returns as the yield curve began
to flatten in the latter months of the period.
The fund's positioning along the yield curve remained consistent throughout the
period. We favored the longer-term segment of the curve, purchasing bonds
4
primarily in the 25-to-30 year maturity range. This proved advantageous as
longer-dated issues outperformed those with shorter maturities. We also
purchased premium coupon bonds priced to 10 years or shorter, and added to the
fund's holdings in inverse floating-rate securities,* both of which added income
to the fund. We continued to avoid zero-coupon bonds, which have been volatile,
as well as non-callable bonds. The fund also benefited considerably from new
issues being brought into the marketplace that refunded current holdings in the
portfolio, which allowed the fund to capture appreciation gains.
For hedging purposes, we used Bond Market Association (BMA) swaps and to a
lesser extent, Treasury futures. BMA swaps are more closely tied to the
municipal market than are Treasury futures, which we believe makes them a more
effective hedging tool.
The fund maintained an emphasis on the essential services sectors of the market,
such as water and sewer and education bonds. We selectively added some health
care issues to the portfolio but continued to avoid housing bonds. These factors
were also additive to performance whereas an underweight relative to the Lehman
Brothers California Insured Municipal Bond Index in the tax-supported debt and
education sectors tempered returns somewhat. In addition, the portfolio did not
contain any holdings subject to the Alternative Minimum Tax (AMT).
(*)An inverse floating-rate security, or "inverse floater", is a variable rate
security whose coupon rate changes in the opposite direction from the change in
the reference rate used to calculate the coupon rate.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
<Table>
TOP FIVE SECTORS AS OF 9/30/06 RATINGS ALLOCATIONS AS OF 9/30/06
Tax Allocation 22.2% AAA/Aaa 100%
Public Education 20.5
Public Building 17.2
General Purpose 7.2
Higher Education 6.2
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. Ratings allocations are 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.
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. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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 (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 (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 (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 POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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 charges on redemptions of Class B and C Shares;
and redemption fees; 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 4/1/06 - 9/30/06.
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
account values and 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 or redemption fees.
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*
------------------------------------------------
4/1/06 9/30/06 4/1/06-9/30/06
Class A
Actual............................................. $1,000.00 $1,031.28 $4.63
Hypothetical....................................... 1,000.00 1,020.57 4.61
(5% annual return before expenses)
Class B
Actual............................................. 1,000.00 1,034.19 2.45
Hypothetical....................................... 1,000.00 1,022.67 2.43
(5% annual return before expenses)
Class C
Actual............................................. 1,000.00 1,027.98 8.44
Hypothetical....................................... 1,000.00 1,016.77 8.39
(5% annual return before expenses)
Class I
Actual............................................. 1,000.00 1,033.14 3.36
Hypothetical....................................... 1,000.00 1,021.77 3.35
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%, 0.48%,
1.66%, and 0.66% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
8
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
9
together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund. The Fund
discloses information about its portfolio management team members and their
experience in its prospectus. The trustees also discuss certain other services
which are provided on a cost-reimbursement basis by the investment adviser or
its affiliates to the Van Kampen funds including certain accounting,
administrative and legal services. The Board has determined that the nature,
extent and quality of the services provided by the investment adviser support
its decision to approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees discuss with the investment adviser its revenues and expenses,
including among
10
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
11
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS 99.4%
$1,925 Alhambra, CA City Elem Sch Dist Cap Apprec Ser A
(FSA Insd) (a).................................. * 09/01/20 $ 1,064,621
2,000 Anaheim, CA Pub Fin Auth Tax Alloc Rev (Inverse
Fltg) (MBIA Insd)............................... 9.321% 12/28/18 2,209,740
3,000 Baldy Mesa, CA Wtr Dist Ctf Partn Parity Wtr Sys
Impt Proj (AMBAC Insd).......................... 5.000 08/01/36 3,160,710
1,430 Bay Area Govt Assn CA Lease Rev Cap Proj Ser A
(AMBAC Insd) (a)................................ 5.250 07/01/17 1,551,164
2,735 Bay Area Govt Assn CA Lease West Sacramento Ser
A (XLCA Insd) (a)............................... 5.000 09/01/29 2,866,964
1,000 Bonita, CA Uni Sch Dist Election 2004 Ser A
(MBIA Insd)..................................... 5.000 08/01/28 1,055,990
1,070 Bonita, CA Uni Sch Dist Election 2004 Ser A
(MBIA Insd)..................................... 5.250 08/01/24 1,167,456
1,850 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA
Insd) (a)....................................... 5.500 08/01/18 2,013,836
2,165 California Ed Fac Auth Rev Univ Pacific
(MBIA Insd)..................................... 5.875 11/01/20 2,349,350
2,000 California Infrastructure & Econ Dev Bk Rev Bay
Area Toll Brdg First Lien Ser A (Prerefunded @
01/01/28) (FGIC Insd)........................... 5.000 07/01/29 2,249,040
1,050 California Spl Dist Assn Fin Corp Ctf Partn Pgm
Ser DD (a)...................................... 5.625 01/01/27 1,075,704
1,050 California St (FGIC Insd)....................... 6.250 09/01/12 1,193,881
1,200 California St Dept Transn Ctf Ser A Rfdg
(MBIA Insd)..................................... 5.250 03/01/16 1,231,392
2,500 California St Dept Wtr Res Pwr Supply Rev Rite
Ser B (Inverse Fltg) (Acquired 09/08/03, Cost
$2,709,650) (MBIA Insd) (a) (b)................. 6.785 05/01/11 3,021,775
2,500 California St Pub Wks Brd Lease Dept Corrections
Ten Admin Ser A (AMBAC Insd).................... 5.250 03/01/17 2,677,950
7,750 California St Rfdg (FGIC Insd).................. 5.000 02/01/23 7,940,495
1,000 California St Univ Rev & Colleges Systemwide Ser
A (AMBAC Insd).................................. 5.375 11/01/18 1,090,820
1,900 California Statewide Cmntys Dev Auth Wtr Rev Ser
A (FSA Insd).................................... 5.000 10/01/26 2,021,942
1,000 Carson, CA Redev Agy Redev Proj Area No 1 Tax
Alloc (MBIA Insd)............................... 5.500 10/01/15 1,133,110
2,000 Castaic Lake Wtr Agy CA Ctf Partn Wtr Sys Impt
Proj Ser A Rfdg (MBIA Insd)..................... 7.000 08/01/12 2,351,060
3,000 Castaic Lake Wtr Agy CA Rev Ctf Partn Ser A
(MBIA Insd)..................................... 5.250 08/01/23 3,192,870
100 Cerritos, CA Cmnty College Election 2004 Ser A
(MBIA Insd)..................................... 5.000 08/01/26 105,736
</Table>
12 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 125 Cerritos, CA Cmnty College Election 2004 Ser A
(MBIA Insd)..................................... 5.000% 08/01/28 $ 131,999
2,000 Chula Vista, CA Pub Fin Auth Rev Ser A Rfdg
(MBIA Insd)..................................... 5.000 09/01/29 2,103,520
1,160 Coachella, CA Fin Auth Tax Proj 1 & 2 Ser A Rfdg
(XLCA Insd) (a)................................. 5.250 12/01/30 1,241,374
3,140 Colton, CA Jt Uni Sch Dist Election 2001 Ser C
(FGIC Insd) (a)................................. 5.250 02/01/25 3,412,332
3,400 Contra Costa, CA Cmnty College Election 2002
(MBIA Insd)..................................... 5.000 08/01/29 3,585,708
2,890 Cucamonga Vly, CA Wtr Dist Ctf Partn Wtr Fac Fin
(MBIA Insd)..................................... 5.000 09/01/36 3,038,777
2,500 Culver City, CA Redev Agy Tax Alloc Redev Proj
Ser A Rfdg (AMBAC Insd)......................... 5.000 11/01/23 2,649,075
2,400 Dinuba, CA Redev Agy Tax Alloc Merged City Redev
Proj No 2 Rfdg (AMBAC Insd)..................... 5.000 09/01/34 2,514,624
1,000 East Bay, CA Muni Util Dist Wtr Sys Rev
(MBIA Insd)..................................... 5.000 06/01/21 1,055,040
2,195 Elk Grove, CA Uni Sch Dist Spl Tax Cmnty Fac
Dist No 1 (MBIA Insd)........................... 5.000 12/01/35 2,300,997
1,280 Fillmore, CA Uni Sch Dist Election 2004 Ser A
(FSA Insd)...................................... 5.000 08/01/27 1,360,230
1,300 Folsom Cordova, CA Uni Sch Dist Sch Fac Impt
Dist No 2 Ser A (MBIA Insd)..................... 5.375 10/01/17 1,412,281
1,360 Folsom, CA Pub Fin Auth City Hall & Cmnty Ctr
Rfdg (FSA Insd) (a)............................. 5.000 10/01/16 1,456,288
1,480 Fontana, CA Redev Agy Tax Alloc Dwntwn Redev
Proj Rfdg (MBIA Insd)........................... 5.000 09/01/21 1,536,284
650 Fresno, CA Jt Pwrs Fin Auth Ser A (FSA Insd).... 5.000 06/01/17 686,348
590 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd) (a)....................................... 5.900 08/01/17 695,923
630 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd) (a)....................................... 5.900 08/01/18 748,856
675 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd) (a)....................................... 5.900 08/01/19 806,895
720 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd) (a)....................................... 5.900 08/01/20 867,247
2,000 Glendale, CA Redev Agy Tax Ctr Glendale Redev
Proj (MBIA Insd)................................ 5.250 12/01/20 2,159,640
2,425 Glendora, CA Pub Fin Auth Tax Alloc Proj No 1
Ser A (MBIA Insd)............................... 5.000 09/01/24 2,545,619
2,230 Hanford, CA High Sch Dist Election 1998 Ser C
(MBIA Insd) (a)................................. 5.700 08/01/28 2,532,745
2,275 Hawaiian Gardens, CA Redev Agy Proj No 1 Tax
Alloc Ser A (AMBAC Insd)........................ 5.000 12/01/25 2,425,241
</Table>
See Notes to Financial Statements 13
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$2,500 Huntington Beach, CA High Election 2004
(FSA Insd)...................................... 5.000% 08/01/26 $ 2,643,400
2,000 Imperial Irr Dist CA Ctf Partn Elec Sys Proj
(FSA Insd)...................................... 5.250 11/01/23 2,147,180
1,950 Imperial Irr Dist CA Ctf Partn Wtr Sys Proj
(AMBAC Insd) (a)................................ 5.000 07/01/19 2,053,954
2,000 Inglewood, CA Redev Agy Tax Alloc Merged Redev
Proj Ser A Rfdg (AMBAC Insd).................... 5.250 05/01/23 2,253,880
1,715 Irvine, CA Pub Fac & Infrastructure Ser B (AMBAC
Insd) (a)....................................... 5.000 09/02/23 1,774,442
2,000 La Canada, CA Uni Sch Dist Election 2004 Ser A
(MBIA Insd)..................................... 5.500 08/01/28 2,205,000
2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.000 09/01/29 2,104,740
2,000 La Quinta, CA Redev Agy Tax Alloc Redev Proj
Area No 1 (AMBAC Insd).......................... 5.000 09/01/22 2,125,520
2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.250 09/01/24 2,167,540
1,000 Livermore-Amador Vly Wtr Mgmt Agy CA Swr Rev Ser
A (AMBAC Insd).................................. 5.250 08/01/16 1,074,460
1,260 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac
Proj (AMBAC Insd) (a)........................... 5.250 11/01/16 1,374,887
1,545 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac
Proj (AMBAC Insd) (a)........................... 5.250 11/01/20 1,672,246
2,000 Long Beach, CA Cmnty College Dist 2002 Election
Ser B (FGIC Insd)............................... 5.000 05/01/25 2,128,400
2,000 Los Angeles, CA Cmnty Redev Agy Cmnty Redev Fin
Auth Rev Ser N (MBIA)........................... 5.250 09/01/26 2,178,220
2,740 Los Angeles Cnty, CA Ctf Partn Antelope Vly
Courthouse Ser A (AMBAC Insd)................... 5.750 11/01/16 2,966,379
1,000 Los Angeles Cnty, CA Ctf Partn Disney Pkg Proj
Rfdg (AMBAC Insd)............................... 4.750 03/01/23 1,018,040
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 1,038,210
1,265 Los Angeles Cnty, CA Schs Regionalized Business
Svcs Ctf Partn Cap Apprec Pooled Fin Ser A
(AMBAC Insd).................................... * 08/01/24 567,934
1,975 Los Angeles, CA Ctf Partn Real Ppty Pgm Ser T
(MBIA Insd) (a)................................. 5.000 02/01/19 2,075,192
2,000 Los Angeles, CA Dept Wtr & Pwr Sys Ser C (MBIA
Insd)........................................... 5.000 07/01/26 2,113,660
2,350 Los Angeles, CA Mtg Rev FHA Security 8 Asstd
Proj Ser A Rfdg (MBIA Insd)..................... 6.100 07/01/25 2,352,726
1,375 Los Angeles, CA Spl Assmt Landscaping & Ltg Dist
No 96 Ser 1 (AMBAC Insd) (a).................... 5.000 03/01/21 1,439,680
1,000 Lynwood, CA Uni Sch Dist 2002 Election Ser A
(FSA Insd)...................................... 5.000 08/01/27 1,050,410
</Table>
14 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$1,000 Menifee, CA Uni Sch Dist 2002 Election Ser B
(FGIC Insd)..................................... 5.000% 08/01/28 $ 1,060,400
1,500 Modesto, CA Irr Rect Ctf Partn Cap Impt Ser A
(FSA Insd)...................................... 5.250 07/01/18 1,608,180
1,105 Monrovia, CA Fin Auth Lease Rev Hillside
Wilderness Preserve (AMBAC Insd)................ 5.000 12/01/20 1,182,516
2,000 Montclair, CA Redev Agy Tax Redev Proj No V Rfdg
(MBIA Insd)..................................... 5.000 10/01/20 2,124,180
1,000 Mount Pleasant, CA Elem Sch Dist 1998 Election
Ser C (FSA Insd)................................ 5.500 03/01/26 1,076,190
1,570 Mountain View, CA Shoreline Tax Alloc Ser A
(MBIA Insd) (a)................................. 5.250 08/01/16 1,677,466
1,105 National City, CA Cmnty Dev Com Redev Proj Ser B
Rfdg (AMBAC Insd)............................... 5.250 08/01/32 1,185,212
2,060 Norco, CA Redev Agy Tax Alloc Norco Redev Proj
Area No 1 Rfdg (AMBAC Insd)..................... 5.000 03/01/26 2,172,085
1,000 Novato, CA Uni Sch Dist (FSA Insd).............. 5.000 08/01/28 1,055,990
3,915 Oak Grove, CA Sch Dist 1995 Election (FGIC
Insd)........................................... 5.250 08/01/25 4,147,590
1,000 Oakland, CA Uni Sch Dist Alameda Cnty
(FSA Insd)...................................... 5.000 08/01/17 1,031,750
1,300 Oceanside, CA Ctf Part Ser A Rfdg (AMBAC
Insd)........................................... 5.200 04/01/23 1,383,291
3,025 Orange Cnty, CA Pub Fin Auth Lease Rev Juvenile
Justice Ctr Fac Rfdg (AMBAC Insd)............... 5.375 06/01/17 3,307,323
1,145 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd)..... 5.000 10/01/25 1,209,521
1,200 Palm Desert, CA Fin Auth Tax Alloc Rev Proj Area
No 4 Ser A Rfdg (MBIA Insd)..................... 5.000 10/01/29 1,270,224
1,340 Palm Springs, CA Fin Lease Rev Convention Ctr
Proj Ser A Rfdg (MBIA Insd)..................... 5.250 11/01/19 1,446,932
3,545 Panama-Buena Vista Uni Sch Dist CA Ctf Partn Sch
Constr Proj (MBIA Insd)......................... 5.000 09/01/30 3,739,195
3,065 Placentia Yorba Linda, CA Uni Sch Dist Ctf Partn
(FGIC Insd)..................................... 5.000 10/01/30 3,224,962
2,020 Pomona, CA Pub Fin Auth Rev Merged Redev Proj
Ser AD (MBIA Insd) (a).......................... 5.000 02/01/15 2,134,231
1,110 Pomona, CA Pub Fin Auth Rev Merged Redev Proj
Ser AD (MBIA Insd) (a).......................... 5.000 02/01/16 1,172,770
1,360 Port Hueneme, CA Ctf Partn Cap Impt Pgm Rfdg
(MBIA Insd)..................................... 6.000 04/01/19 1,629,321
1,055 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj
(AMBAC Insd) (a)................................ 5.375 06/15/20 1,143,842
3,000 Rancho Cucamonga, CA Redev Agy Rancho Redev Proj
(MBIA Insd)..................................... 5.375 09/01/25 3,206,040
925 Redding, CA Elec Sys Rev Ctf Partn (Inverse
Fltg) (Escrowed to Maturity) (MBIA Insd)........ 9.207 07/01/22 1,292,808
1,400 Redding, CA Redev Agy Tax Alloc Canby Hilltop
Cypress Redev Ser A (MBIA Insd)................. 5.000 09/01/23 1,485,708
</Table>
See Notes to Financial Statements 15
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$3,775 Riverside, CA Lease Rev Ctf Partn Galleria at
Tyler Pub Impt (FGIC Insd)...................... 5.000% 09/01/36 $ 3,969,337
3,775 Riverside Cnty, CA Ctf Partn Historic Courthouse
Proj (FGIC Insd) (a)............................ 5.000 11/01/27 3,982,097
2,160 Roseville, CA Jt Un High Sch Election 2004 Ser A
(FGIC Insd) (a)................................. 5.000 08/01/26 2,283,898
2,000 Sacramento Cnty, CA San Dist Fin Auth Rev
Sacramento Regl Cnty San (FGIC Insd)............ 5.000 12/01/29 2,130,080
1,000 Sacramento, CA City Fin Auth Rev Cap Impt (AMBAC
Insd)........................................... 5.000 12/01/33 1,044,320
1,500 San Diego Cnty, CA Ctf Partn Edgemoor Proj &
Regl Sys Rfdg (AMBAC Insd)...................... 5.000 02/01/23 1,589,565
2,000 San Francisco, CA City & Cnty Second Ser Issue
26B (FGIC Insd)................................. 5.000 05/01/22 2,089,880
2,290 San Jose, CA Uni Sch Dist Ctf Partn Rfdg (FGIC
Insd)........................................... 4.500 06/01/24 2,326,342
2,675 San Jose, CA Fin Auth Lease Rev Convention Ctr
Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,829,481
1,000 San Leandro, CA Ctf Part Lib & Fire Stations Fin
(AMBAC Insd).................................... 5.750 11/01/29 1,076,230
1,000 San Leandro, CA Jt Proj Area Fin (MBIA Insd).... 5.100 12/01/26 1,058,580
1,340 Sanger, CA Uni Sch Dist Ctf Cap Impt Prog (FSA
Insd) (a)....................................... 5.000 03/01/25 1,422,812
2,000 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc
Ser A Rfdg (MBIA Insd) (a)...................... 5.375 09/01/20 2,135,880
2,065 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc
Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/21 2,199,989
2,450 Santa Monica, CA Cmnty College Ser A Rfdg (AMBAC
Insd) (a)....................................... 5.250 02/01/23 2,635,710
1,460 Shafter, CA Cmnty Dev Agy Tax Alloc Rev Cmnty
Dev Proj Area No 1 Ser A Rfdg (FSA Insd)........ 5.000 11/01/36 1,536,168
1,000 Shasta, CA Jt Pwr Fin Auth Cnty Admin Bldg Proj
Ser A (MBIA Insd)............................... 5.250 04/01/22 1,071,270
1,000 South Gate, CA Pub Fin Auth South Gate Redev
Proj No 1 (XLCA Insd)........................... 5.750 09/01/22 1,117,380
2,150 Temecula, CA Redev Agy Tax Alloc Rev Temecula
Redev Proj No 1 (MBIA Insd)..................... 5.125 08/01/27 2,235,850
2,500 Turlock, CA Pub Fin Auth Tax Alloc Rev
(FSA Insd)...................................... 5.000 09/01/36 2,628,700
1,000 University of CA Rev Multi Purp Proj Ser M (FGIC
Insd)........................................... 5.125 09/01/17 1,049,930
1,000 University of CA Rev Resh Fac Ser E
(AMBAC Insd).................................... 5.000 09/01/19 1,045,920
1,540 Vallejo City, CA Uni Sch Dist Ser A Rfdg
(MBIA Insd)..................................... 5.900 02/01/20 1,853,405
</Table>
16 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$2,000 Ventura Cnty, CA Ctf Partn Pub Fin Auth Ser I
(FSA Insd)...................................... 5.250% 08/15/16 $ 2,090,200
3,655 Woodland, CA Fin Auth Wastewater Rev Second Sr
Lien (MBIA Insd) (a)............................ 5.000 03/01/30 3,843,306
------------
TOTAL INVESTMENTS 99.4%
(Cost $215,216,236)....................................................... 227,732,806
OTHER ASSETS IN EXCESS OF LIABILITIES 0.6%................................. 1,373,079
------------
NET ASSETS 100.0%.......................................................... $229,105,885
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) The Fund owns 100% of the outstanding bond issuance.
(b) This security is restricted and may be resold only in transactions exempt
from registration which are normally those transactions with qualified
institutional buyers. Restricted securities comprise 1.3% of net assets.
AMBAC--AMBAC Indemnity Corp.
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
XLCA--XL Capital Assurance Inc.
See Notes to Financial Statements 17
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2006
<Table>
ASSETS:
Total Investments (Cost $215,216,236)....................... $ 227,732,806
Receivables:
Interest.................................................. 2,403,871
Fund Shares Sold.......................................... 217,530
Other....................................................... 158,193
--------------
Total Assets............................................ 230,512,400
--------------
LIABILITIES:
Payables:
Custodian Bank............................................ 352,708
Fund Shares Repurchased................................... 281,465
Income Distributions...................................... 198,588
Swap Contract............................................. 139,531
Investment Advisory Fee................................... 88,375
Distributor and Affiliates................................ 8,884
Trustees' Deferred Compensation and Retirement Plans........ 228,231
Accrued Expenses............................................ 108,733
--------------
Total Liabilities....................................... 1,406,515
--------------
NET ASSETS.................................................. $ 229,105,885
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $ 215,173,211
Net Unrealized Appreciation................................. 12,516,570
Accumulated Net Realized Gain............................... 871,553
Accumulated Undistributed Net Investment Income............. 544,551
--------------
NET ASSETS.................................................. $ 229,105,885
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $190,008,231 and 10,230,102 shares of
beneficial interest issued and outstanding)............. $ 18.57
Maximum sales charge (4.75%* of offering price)......... .93
--------------
Maximum offering price to public........................ $ 19.50
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $25,262,197 and 1,339,201 shares of
beneficial interest issued and outstanding)............. $ 18.86
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $9,943,503 and 535,190 shares of
beneficial interest issued and outstanding)............. $ 18.58
==============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $3,891,954 and 209,561 shares of
beneficial interest issued and outstanding)............. $ 18.57
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
18 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended September 30, 2006
<Table>
INVESTMENT INCOME:
Interest.................................................... $10,926,660
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,081,723
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $463,787, $5,941 and $110,694,
respectively)............................................. 580,422
Shareholder Services........................................ 126,612
Legal....................................................... 40,118
Trustees' Fees and Related Expenses......................... 36,257
Custody..................................................... 23,384
Other....................................................... 215,302
-----------
Total Expenses.......................................... 2,103,818
Less Credits Earned on Cash Balances.................... 8,828
-----------
Net Expenses............................................ 2,094,990
-----------
NET INVESTMENT INCOME....................................... $ 8,831,670
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 1,011,910
Swap Contracts............................................ (34,020)
Futures................................................... (51,471)
-----------
Net Realized Gain........................................... 926,419
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 13,202,185
End of the Period......................................... 12,516,570
-----------
Net Unrealized Depreciation During the Period............... (685,615)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 240,804
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 9,072,474
===========
</Table>
See Notes to Financial Statements 19
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
---------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 8,831,670 $ 9,071,213
Net Realized Gain.................................... 926,419 2,956,456
Net Unrealized Depreciation During the Period........ (685,615) (2,833,739)
------------ ------------
Change in Net Assets from Operations................. 9,072,474 9,193,930
------------ ------------
Distributions from Net Investment Income:
Class A Shares..................................... (7,346,494) (7,367,133)
Class B Shares..................................... (1,198,106) (1,193,998)
Class C Shares..................................... (355,129) (381,330)
Class I Shares..................................... (110,088) (14,214)
------------ ------------
(9,009,817) (8,956,675)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares..................................... (2,396,767) (1,194,255)
Class B Shares..................................... (396,499) (256,541)
Class C Shares..................................... (152,451) (76,525)
Class I Shares..................................... (31,914) -0-
------------ ------------
(2,977,631) (1,527,321)
------------ ------------
Total Distributions.................................. (11,987,448) (10,483,996)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... (2,914,974) (1,290,066)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 38,204,676 34,454,209
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 8,620,544 7,391,256
Cost of Shares Repurchased........................... (51,173,595) (40,845,600)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (4,348,375) 999,865
------------ ------------
TOTAL DECREASE IN NET ASSETS......................... (7,263,349) (290,201)
NET ASSETS:
Beginning of the Period.............................. 236,369,234 236,659,435
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $544,551 and
$727,655, respectively)............................ $229,105,885 $236,369,234
============ ============
</Table>
20 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS A SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $18.80 $18.93 $18.84 $19.45 $18.64
------ ------ ------ ------ ------
Net Investment Income...................... .71(a) .72 .75 .74 .77
Net Realized and Unrealized Gain/Loss...... .03 .01 .06 (.44) .85
------ ------ ------ ------ ------
Total from Investment Operations............. .74 .73 .81 .30 1.62
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .73 .74 .72 .75 .78
Distributions from Net Realized Gain....... .24 .12 -0- .16 .03
------ ------ ------ ------ ------
Total Distributions.......................... .97 .86 .72 .91 .81
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $18.57 $18.80 $18.93 $18.84 $19.45
====== ====== ====== ====== ======
Total Return (b)............................. 4.14% 3.96% 4.42% 1.67% 9.01%
Net Assets at End of the Period (In
millions).................................. $190.0 $188.0 $183.0 $195.4 $200.4
Ratio of Expenses to Average Net Assets...... .91% .92% .89% .87% .87%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.86% 3.83% 4.00% 3.93% 4.18%
Portfolio Turnover........................... 31% 25% 16% 25% 32%
</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 or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months 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 21
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS B SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $19.07 $19.03 $18.82 $19.44 $18.65
------ ------ ------ ------ ------
Net Investment Income...................... .77(a) .79 .72 .60 .63
Net Realized and Unrealized Gain/Loss...... .02 (.03) .07 (.45) .84
------ ------ ------ ------ ------
Total from Investment Operations............. .79 .76 .79 .15 1.47
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .76 .60 .58 .61 .65
Distributions from Net Realized Gain....... .24 .12 -0- .16 .03
------ ------ ------ ------ ------
Total Distributions.......................... 1.00 .72 .58 .77 .68
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $18.86 $19.07 $19.03 $18.82 $19.44
====== ====== ====== ====== ======
Total Return (b)............................. 4.40%(c) 4.10%(c) 4.29%(c) 0.87% 8.16%
Net Assets at End of the Period (In
millions).................................. $ 25.3 $ 33.7 $ 41.1 $ 49.8 $ 53.0
Ratio of Expenses to Average Net Assets...... .69%(c) .81%(c) 1.09%(c) 1.62% 1.63%
Ratio of Net Investment Income to Average Net
Assets..................................... 4.08%(c) 3.96%(c) 3.80%(c) 3.18% 3.42%
Portfolio Turnover........................... 31% 25% 16% 25% 32%
</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 fifth 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.
(c) 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 7).
22 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS C SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $18.81 $18.93 $18.82 $19.43 $18.64
------ ------ ------ ------ ------
Net Investment Income...................... .57(a) .59 .61 .61 .64
Net Realized and Unrealized Gain/Loss...... .03 .01 .08 (.45) .83
------ ------ ------ ------ ------
Total from Investment Operations............. .60 .60 .69 .16 1.47
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .59 .60 .58 .61 .65
Distributions from Net Realized Gain....... .24 .12 -0- .16 .03
------ ------ ------ ------ ------
Total Distributions.......................... .83 .72 .58 .77 .68
------ ------ ------ ------ ------
Net Asset Value, End of the Period........... $18.58 $18.81 $18.93 $18.82 $19.43
====== ====== ====== ====== ======
Total Return (b)............................. 3.36% 3.26%(d) 3.75%(d) 0.92%(c) 8.16%
Net Assets at End of the Period (In
millions).................................. $ 9.9 $ 12.0 $ 12.6 $ 18.1 $ 15.0
Ratio of Expenses to Average Net Assets...... 1.66% 1.61%(d) 1.59%(d) 1.62% 1.63%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.11% 3.15%(d) 3.30%(d) 3.20%(c) 3.41%
Portfolio Turnover........................... 31% 25% 16% 25% 32%
</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) 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 7).
See Notes to Financial Statements 23
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
AUGUST 12, 2005
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
CLASS I SHARES SEPTEMBER 30, SEPTEMBER 30,
2006 2005
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................ $18.80 $18.87
------ ------
Net Investment Income................................. .74(a) .09
Net Realized and Unrealized Gain/Loss................. .05 (.06)
------ ------
Total from Investment Operations........................ .79 .03
------ ------
Less:
Distributions from Net Investment Income.............. .78 .10
Distributions from Net Realized Gain.................. .24 -0-
------ ------
Total Distributions..................................... 1.02 .10
------ ------
NET ASSET VALUE, END OF THE PERIOD...................... $18.57 $18.80
====== ======
Total Return (b)........................................ 4.40% 0.17%*
Net Assets at End of the Period (In millions)........... $ 3.9 $ 2.6
Ratio of Expenses to Average Net Assets................. .66% .73%
Ratio of Net Investment Income to Average Net Assets.... 4.11% 4.03%
Portfolio Turnover...................................... 31% 25%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
24 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006
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 Fund offers Class A Shares,
Class B Shares, Class C Shares and Class I Shares. Each class of shares differs
by its initial sales load, contingent deferred sales charges, the allocation of
class specific expenses and voting rights on matters affecting a single class.
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. Interest rate swaps are valued using market
quotations from brokers. 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 September 30, 2006, 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.
25
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 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.
At September 30, 2006, the cost and related gross unrealized appreciation
and depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $215,019,141
============
Gross tax unrealized appreciation........................... $ 12,713,665
Gross tax unrealized depreciation........................... -0-
------------
Net tax unrealized appreciation on investments.............. $ 12,713,665
============
</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 years ended September 30,
2006 and 2005 was as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $ 95,063 $ 755
Tax exempt income......................................... 9,038,938 8,952,295
Long-term capital gain.................................... 2,883,508 1,527,321
----------- -----------
$12,017,509 $10,480,371
=========== ===========
</Table>
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities. A permanent difference relating to the Fund's
investment in other regulated investment companies totaling $4,955 was
reclassified from accumulated undistributed net investment income to accumulated
net realized gain. Additionally, a permanent book and tax difference of $2
related to book to tax accretion differences was reclassified from accumulated
undistributed net investment income to accumulated net realized gain.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 881
Undistributed tax-exempt income............................. 757,779
Undistributed long-term capital gain........................ 863,817
</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
26
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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 year ended September 30, 2006, the Fund's
custody fee was reduced by $8,828 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 $100 million.......................................... .500%
Next $150 million........................................... .450%
Next $250 million........................................... .425%
Over $500 million........................................... .400%
</Table>
For the year ended September 30, 2006, the Fund recognized expenses of
approximately $10,100 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 Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the year ended September 30,
2006, the Fund recognized expenses of approximately $62,300 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Legal" expenses on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses 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 year ended
September 30, 2006, the Fund recognized expenses of approximately $101,000
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $130,897 are included in
"Other" assets on the Statement of Assets and Liabilities at September 30, 2006.
Appreciation/depreciation and distributions received from these investments are
recorded with
27
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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.
For the year ended September 30, 2006, Van Kampen as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $80,800 and contingent deferred sale charge (CDSC) on redeemed
shares of approximately $25,900. Sales charges do not represent expenses of the
Fund.
3. CAPITAL TRANSACTIONS
For the years ended September 30, 2006 and 2005, transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A........................... 1,812,267 $ 33,433,166 1,471,767 $ 27,872,464
Class B........................... 49,974 934,624 83,294 1,597,761
Class C........................... 108,337 2,004,651 118,736 2,246,315
Class I........................... 100,465 1,832,235 145,079 2,737,669
---------- ------------ ---------- ------------
Total Sales......................... 2,071,043 $ 38,204,676 1,818,876 $ 34,454,209
========== ============ ========== ============
Dividend Reinvestment:
Class A........................... 380,862 $ 7,032,383 320,900 $ 6,072,157
Class B........................... 60,585 1,135,274 53,489 1,021,670
Class C........................... 16,821 310,888 14,962 283,212
Class I........................... 7,689 141,999 753 14,217
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 465,957 $ 8,620,544 390,104 $ 7,391,256
========== ============ ========== ============
Repurchases:
Class A........................... (1,962,076) $(36,181,704) (1,459,363) $(27,608,932)
Class B........................... (536,985) (10,050,277) (528,905) (10,111,922)
Class C........................... (229,765) (4,227,565) (158,990) (3,012,985)
Class I........................... (38,520) (714,049) (5,905) (111,761)
---------- ------------ ---------- ------------
Total Repurchases................... (2,767,346) $(51,173,595) (2,153,163) $(40,845,600)
========== ============ ========== ============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the year ended September 30,
2006, the Fund received redemption fees of approximately $2,500, which are
reported as part of "Cost of Shares Repurchased" in the Statement of Changes in
Net Assets. The per share impact from redemption fees paid to the Fund was less
than $0.01.
28
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $69,282,470 and $74,941,574,
respectively.
6. 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 may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage 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 these instances, 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 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 and typically closes
the contract prior to the delivery date. The contracts are generally used to
manage the portfolio'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).
Transactions in futures contracts for the year ended September 30, 2006,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2005........................... -0-
Futures Opened.............................................. 182
Futures Closed.............................................. (182)
----
Outstanding at September 30, 2006........................... -0-
====
</Table>
B. INVERSE FLOATING RATE SECURITIES An inverse floating rate security is one
where the coupon is inversely indexed to a short-term interest rate multiplied
by a specific factor. As the floating rate rises, the coupon is reduced.
Conversely, as the floating rate declines, the coupon is increased. The price of
these securities may be more volatile than the price of a comparable fixed rate
security. These instruments are typically used by the Fund to enhance the yield
of the portfolio. These instruments are identified in the Portfolio of
Investments.
C. INTEREST RATE SWAPS The Fund may enter into forward interest rate swap
transactions intended to help the Fund manage its overall interest rate
sensitivity, either shorter or longer,
29
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
generally to more closely align the Fund's interest rate sensitivity with that
of the broader municipal market. Forward interest rate swap transactions involve
the Fund's agreement with a counterparty to pay, in the future, a fixed or
variable rate payment in exchange for the counterparty paying the Fund a
variable or fixed rate payment, the accruals for which would begin at a
specified date in the future (the "effective date"). The amount of the payment
obligation is based on the notional amount of the forward swap contract and the
termination date of the swap (which is akin to a bond's maturity). The value of
the Fund's swap commitment would increase or decrease based primarily on the
extent to which long-term interest rates for bonds having a maturity of the
swap's termination date increases or decreases. The Fund may terminate a swap
contract prior to the effective date, at which point a realized gain or loss is
recognized. When a forward swap is terminated, it ordinarily does not involve
the delivery of securities or other underlying assets or principal, but rather
is settled in cash on a net basis. The Fund intends, but is not obligated, to
terminate its forward swaps before the effective date. Accordingly, the risk of
loss with respect to the swap counterparty on such transactions is limited to
the credit risk associated with a counterparty failing to honor its commitment
to pay any realized gain to the Fund upon termination. To reduce such credit
risk, all counterparties are required to pledge collateral daily (based on the
daily valuation of each swap) on behalf of the Fund with a value approximately
equal to the amount of any unrealized gain. Reciprocally, when the Fund has an
unrealized loss on a swap contract, the Fund has instructed the custodian to
pledge cash or liquid securities as collateral with a value approximately equal
to the amount of the unrealized loss. Collateral pledges are monitored and
subsequently adjusted if and when the swap valuations fluctuate. Restricted
cash, if any, for segregating purposes is shown on the Statement of Assets and
Liabilities.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees 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. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $0 and $0 for Class B
and Class C Shares, respectively. These amounts may be recovered from future
payments under the distribution plan or CDSC. To the extent the unreimbursed
receivable has been fully recovered, the distribution fee is reduced.
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action 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 Van Kampen funds. The complaint
also alleges that the Van Kampen funds paid excessive commissions to
30
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal, which is located at the back of this Report.
9. 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.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The impact to the Fund's financial
statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for the
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
31
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen California Insured Tax
Free Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen California Insured Tax Free Fund (the "Fund"), including the portfolio of
investments, as of September 30, 2006, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen California Insured Tax Free Fund at September 30, 2006, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
November 14, 2006
32
VAN KAMPEN CALIFORNIA INSURED TAX FREE 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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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
One Lincoln Street
Boston, Massachusetts 02111
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
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
September 30, 2006. The Fund designated 99.9% of the income distributions as a
tax-exempt income distribution. The Fund designated and paid $2,883,508 as a
long-term capital gain distribution. In January, the Fund provides tax
information to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
33
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
34
<Table>
<Caption>
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
35
<Table>
<Caption>
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1993 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
36
<Table>
<Caption>
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1985 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing
(64) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
37
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 1985 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
38
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
</Table>
39
<Table>
<Caption>
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
</Table>
40
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen--as well as several other decisions
by other judges in the Southern District of New York and certain other courts
that have dismissed similar complaints against other investment funds--plaintiff
in the derivative action has determined that the suit would be unsuccessful, if
pursued further. Accordingly, plaintiff has asked Judge Owen to dismiss the
action. No attorneys' fees will be paid by defendants and no consideration will
be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than December 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen California Insured Tax Free Fund
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.
(continued on next page)
Van Kampen California Insured Tax Free Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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, 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
(continued on back)
Van Kampen California Insured Tax Free Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
41, 341, 541
CAI ANR 11/06
(VAN KAMPEN INVESTMENTS LOGO) RN06-03210P-Y09/06
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Municipal Income Fund performed during the 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 September 30,
2006.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B AND C SHARE
OR CLASS I [AND R] SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUSES CONTAIN INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. 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 9/30/06
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Municipal Bond Index from 9/30/96 through 9/30/06. Class A shares, adjusted for
sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN MUNICIPAL INCOME LEHMAN BROTHERS MUNICIPAL BOND
FUND INDEX
--------------------------- ------------------------------
9/96 9528 10000
9643 10113
9804 10298
9755 10255
9764 10274
9843 10369
9753 10230
9831 10316
9942 10471
10080 10583
10376 10876
10231 10774
9/97 10357 10902
10437 10972
10485 11037
10646 11197
10728 11313
10748 11316
10762 11326
10674 11275
10860 11454
10908 11499
10929 11528
11118 11706
9/98 11244 11852
11174 11851
11182 11893
11196 11923
11296 12065
11225 12012
11218 12029
11247 12059
11183 11989
10957 11816
10979 11859
10811 11764
9/99 10767 11769
10626 11642
10693 11765
10589 11678
10481 11627
10601 11762
10789 12019
10695 11948
10609 11886
10870 12201
11004 12371
11139 12561
9/00 11056 12496
11106 12632
11156 12728
11443 13042
11515 13172
11564 13213
11669 13332
11468 13187
11599 13329
11695 13418
11882 13617
12094 13842
9/01 12043 13795
12166 13959
12015 13842
11872 13711
12064 13949
12205 14117
11951 13840
12162 14111
12262 14196
12389 14346
12560 14531
12713 14705
9/02 13049 15028
12753 14778
12691 14717
12984 15028
12875 14990
13091 15199
13123 15208
13234 15309
13551 15667
13449 15601
12888 15055
13044 15167
9/03 13481 15613
13402 15534
13569 15696
13681 15826
13721 15917
14000 16156
13864 16100
13514 15719
13461 15662
13529 15719
13701 15926
13949 16245
9/04 14047 16331
14146 16472
13988 16336
14202 16535
14369 16690
14296 16634
14136 16529
14383 16790
14494 16909
14596 17013
14492 16937
14683 17108
9/05 14579 16992
14484 16889
14557 16970
14701 17116
14736 17162
14861 17278
14794 17158
14778 17153
14864 17229
14837 17164
15016 17368
15247 17626
9/06 15375 17749
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 8/1/90 since 8/24/92 since 8/13/93 since 8/12/05
- ------------------------------------------------------------------------------------------------------
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 W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES
Since Inception 5.97% 5.66% 4.72% 4.72% 4.12% 4.12% 5.52%
10-year 4.90 4.40 4.27 4.27 4.11 4.11 --
5-year 5.01 3.98 4.23 3.98 4.23 4.23 --
1-year 5.46 0.48 4.69 0.69 4.62 3.62 5.65
- ------------------------------------------------------------------------------------------------------
30-Day SEC Yield 3.32% 2.75% 2.75% 3.75%
</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 eight 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. Class I shares are
available for purchase exclusively by investors through (i) tax-exempt
retirement plans with assets of at least $1 million (including 401(k) plans, 457
plans, employer-sponsored 403(b) plans, profit sharing and money purchase plans,
defined benefit plans and non-qualified deferred compensation plans), (ii)
fee-based investment programs with assets of at least $1 million and (iii)
institutional clients with assets of at least $1 million. Class I shares are
offered without any sales charges on purchases or sales and do not include
combined Rule 12b-1 fees and service fees. Figures shown above assume
reinvestment of all dividends and capital gains. SEC yield is a calculation
1
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.
2
Fund Report
FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
MARKET CONDITIONS
Against the backdrop of strong economic growth, good employment data and
inflationary pressures stemming from rising oil prices, the Federal Open Market
Committee (the "Fed") continued its tightening campaign during the first nine
months of the reporting period, raising the federal funds target rate six times
to 5.25 percent at the end of June. As the months progressed however, economic
growth moderated as consumer spending and housing weakened while inflation
concerns eased, prompting investors to speculate that the Fed would take a break
from rate increases. In August the Fed did pause, ending a two-year run of 17
consecutive rate increases--the longest stretch of increases in 25 years. At its
September meeting, the Fed again kept its target rate unchanged, and indicated
that any future rate increases would be driven by the weight of economic data.
As a result of the improved outlook for the fixed income market, yields on
longer-maturity municipal bonds fell dramatically in latter months of the
reporting year, ultimately ending at the lowest level in decades. Yields on
shorter-maturity municipal bonds, however, moved higher. Accordingly, the slope
of the municipal yield curve flattened as the spread between short-term and
long-term interest rates narrowed.
Demand for municipal bonds continued to be strong during the period. In fact,
inflows into municipal bond funds were 45 percent higher year-to-date through
September than for the same period last year, much of which went into high yield
funds. Because prevailing interest rates were still at relatively low levels,
investors increasingly sought out lower-quality, higher yielding bonds. The
increased demand for high yield bonds led this segment of the market to
considerably outperform high-grade issues. In addition, long-term bonds
continued to earn the best returns, while the short end of the curve posted the
lowest returns as Fed rate increases moved yields in this portion of the curve
higher.
Although municipal bond issuance remained brisk in the last quarter of 2005,
volume declined throughout the remaining months of the period. As of the end of
September, national municipal bond issuance was down 14 percent for 2006. The
reduced supply, coupled with growing demand, further fueled municipal bond
performance.
3
PERFORMANCE ANALYSIS
The fund returned 5.46 percent for the 12 months ended September 30, 2006 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark,
the Lehman Brothers Municipal Bond Index, returned 4.45 percent for the period.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN
BROTHERS
MUNICIPAL
CLASS A CLASS B CLASS C CLASS I BOND INDEX
5.46% 4.69% 4.62% 5.65% 4.45%
- --------------------------------------------------------------
</Table>
The performance for the four 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.
We sought opportunities to enhance the portfolio's yield, selectively adding
bonds to the portfolio that we believed were both attractively valued and
offered greater future total return prospects. To implement this strategy, we
lowered the fund's exposure to AAA rated bonds, investing the proceeds into
higher yielding BBB rated bonds. As a result, the fund was overweighted versus
the Lehman Brothers Municipal Bond Index in BBB and non-rated bonds, which
proved advantageous as this portion of the market outperformed higher-rated
bonds. Despite this shift in credit allocation, however, the fund's overall
credit quality remained high.
The fund also benefited from an overweight relative to the Lehman Brothers
Municipal Bond Index in zero coupon bonds, which outperformed current and
premium coupon bonds during the reporting year, as well as an overweight in the
hospital sector which improved due to credit spread tightening. Holdings in the
tobacco sector also did well as the litigation environment has become favorable
for tobacco companies, demand for the bonds remains strong, and the industry
continues to prosper. On a less positive note, an overweight relative to the
Lehman Brothers Municipal Bond Index in prerefunded bonds detracted somewhat
from performance due to their positioning on the short end of the yield curve.
However, these bonds were purchased at much higher interest rates and therefore,
add considerably to the overall yield of the fund.
The fund's yield-curve positioning also had a significant impact on performance.
When making new purchases, we emphasized the long end of the curve, favoring
bonds with maturities of 20 years or more. This strategy served the fund well as
longer-maturity issues outperformed those with shorter maturities during the
reporting period.
4
The fund remained well diversified across the major sectors of the municipal
market. As of the close of the period, general purpose, hospital and wholesale
electric bonds represented the fund's largest sector weightings.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
5
<Table>
<Caption>
RATINGS ALLOCATION AS OF 9/30/06
AAA/Aaa 58.9%
AA/Aa 12.5
A/A 6.1
BBB/Baa 10.4
BB/Ba 0.3
B/B 1.0
NR 10.8
<Caption>
TOP FIVE SECTORS AS OF 9/30/06
General Purpose 13.5%
Hospital 12.1
Wholesale Electric 8.0
Bridge, Tunnel & Toll Road 7.7
Water & Sewer 6.7
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
California 15.0%
New York 13.1
Texas 10.7
Illinois 7.7
Colorado 6.2
New Jersey 5.2
Florida 5.2
Missouri 3.7
Michigan 3.6
Indiana 2.6
Massachusetts 2.1
Utah 2.0
Arizona 2.0
North Carolina 1.7
Connecticut 1.4
Georgia 1.4
Washington 1.3
District of Columbia 1.3
Kansas 1.2
Iowa 1.1
Pennsylvania 1.0
Alabama 1.0
Oregon 1.0
Tennessee 0.9
West Virginia 0.8
New Hampshire 0.7
Nevada 0.7
Ohio 0.5
Rhode Island 0.5
Alaska 0.5
Minnesota 0.4
</Table>
<Table>
(continued on next page)
</Table>
6
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
(continued from previous page)
Oklahoma 0.4
Nebraska 0.4
Vermont 0.3
Maryland 0.3
Wyoming 0.3
South Carolina 0.2
South Dakota 0.2
Montana 0.2
-----
Total Investments 98.8%
Other Assets in Excess of Liabilities 1.2
-----
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.
7
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. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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 (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 (800) 847-2424.
8
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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.
9
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 charges on redemptions of Class B and C Shares;
and redemption fees; 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 4/1/06 - 9/30/06.
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
account values and 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 or redemption fees.
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*
-------------------------------------------------
4/1/06 9/30/06 4/1/06-9/30/06
Class A
Actual..................................... $1,000.00 $1,039.24 $4.55
Hypothetical............................... 1,000.00 1,020.57 4.51
(5% annual return before expenses)
Class B
Actual..................................... 1,000.00 1,036.85 8.37
Hypothetical............................... 1,000.00 1,016.87 8.29
(5% annual return before expenses)
Class C
Actual..................................... 1,000.00 1,035.50 8.37
Hypothetical............................... 1,000.00 1,016.87 8.29
(5% annual return before expenses)
Class I
Actual..................................... 1,000.00 1,040.54 3.27
Hypothetical............................... 1,000.00 1,021.87 3.24
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.89%, 1.64%,
1.64% and 0.64% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
10
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
11
together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees
12
discuss with the investment adviser its revenues and expenses, including among
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
13
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MUNICIPAL BONDS 98.1%
ALABAMA 1.0%
$2,000 Birmingham Baptist Med Ctr AL Spl Care Fac
Fin Auth Rev Baptist Hlth Sys Inc Ser A..... 5.000% 11/15/30 $ 2,038,800
1,000 Jefferson Cnty, AL Ltd Oblig Sch Wt Ser A... 5.000 01/01/24 1,043,490
3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev
Mobile Energy Svc Co Proj Rfdg.............. 6.950 01/01/20 293
2,250 Montgomery Cnty, AL Pub Bldg Auth Rev Wt Fac
Proj (MBIA Insd)............................ 5.000 03/01/31 2,375,347
1,140 University AL Birmingham Hosp Rev Rites PA
1413-A (Inverse Fltg) (Acquired 09/27/06,
Cost $1,272,445) (b)........................ 6.976 09/01/36 1,247,456
------------
6,705,386
------------
ALASKA 0.5%
3,000 Northern Tob Securitization Corp AK Tob
Settlement Rev Ser A........................ 5.000 06/01/46 3,008,310
------------
ARIZONA 2.0%
1,000 Cottonwood, AZ Wtr Rev Sys Sr Lien
(XLCA Insd)................................. 5.000 07/01/30 1,059,730
5,000 Phoenix, AZ Civic Impt Corp Sr Lien Ser B
(AMT) (FGIC Insd)........................... 5.250 07/01/32 5,214,950
1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd)................ 6.000 09/01/12 1,951,687
1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd)................ 6.125 09/01/17 1,820,525
2,750 University Med Ctr Corp AZ Hosp Rev......... 5.000 07/01/35 2,808,465
------------
12,855,357
------------
CALIFORNIA 15.0%
4,870 Anaheim, CA Pub Fin Auth Lease Rev Cap
Apprec Sub Pub Impt Proj C (FSA Insd)....... * 09/01/20 2,693,353
2,000 California Cnty, CA Tob Securitization Agy
Tob LA Cnty Securitization Ser A (a)........ 0/5.250 06/01/21 1,694,840
1,670 California Cnty, CA Tob Securitization Agy
Tob Sonoma Cnty Corp Rfdg................... 5.000 06/01/26 1,698,089
1,875 California Cnty, CA Tob Securitization Agy
Tob Sonoma Cnty Corp Rfdg................... 5.250 06/01/45 1,911,487
1,000 California Hlth Fac Fin Auth Rev Cedars
Sinai Med Ctr Rfdg.......................... 5.000 11/15/27 1,041,600
1,200 California Hlth Fac Fin Auth Rev Kaiser
Permanente Ser A............................ 5.250 04/01/39 1,270,128
1,000 California Hlth Fac Fin Auth Rev Rites PA
1414 (Inverse Fltg) (Acquired 09/27/06, Cost
$1,099,420) (b)............................. 6.731 11/15/34 1,090,950
305 California Infrastructure & Econ Dev Bk Rev
Bay Area Toll Brdgs First Lien A
(Prerefunded @ 07/01/13) (FSA Insd)......... 5.250 07/01/20 335,982
</Table>
14 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$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)......................................... 6.535% 07/01/11 $ 6,015,750
5,725 California St (FSA Insd).................... 5.000 02/01/29 5,996,250
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)......................................... 6.535 05/01/20 7,864,357
5,000 California St Dept Wtr Res Pwr Supply Rev
Ser A (Prerefunded @ 05/01/12) (XLCA
Insd)....................................... 5.375 05/01/17 5,521,750
7,500 California St Drivers Ser 482 (Inverse Fltg)
(Acquired 07/19/04, Cost $8,325,750) (XLCA
Insd) (b) (c)............................... 6.439 10/01/10 8,720,775
3,500 California St Pub Wks Brd Lease Rev Dept
Corrections Ser C........................... 5.250 06/01/28 3,702,020
1,350 California Statewide Cmnty Dev Auth Rev
Daughters of Charity Hlth Ser A............. 5.000 07/01/39 1,378,701
3,000 California Statewide Cmnty Dev Auth Rev Hlth
Fac Adventist Hlth Ser A.................... 5.000 03/01/35 3,093,060
1,600 California Statewide Cmnty Dev Auth Rev
Kaiser Permanente Ser B..................... 5.000 03/01/41 1,647,440
2,200 California Statewide Cmnty Dev Auth Rev
Kaiser Permanente Ser B..................... 5.250 03/01/45 2,319,438
3,000 California Statewide Cmnty Dev Auth Rev
Kaiser Ser C................................ 5.250 08/01/31 3,195,510
2,640 Escondido, CA Jt Pwrs Fin Auth Lease Rev
(AMBAC Insd)................................ * 09/01/13 1,725,240
5,430 Escondido, CA Jt Pwrs Fin Auth Lease Rev
(AMBAC Insd)................................ * 09/01/14 3,315,015
3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Rfdg (MBIA Insd)................. * 01/15/17 1,809,960
21,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Rfdg............................. * 01/15/24 7,966,140
15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Rfdg............................. * 01/15/30 3,946,650
6,695 San Francisco, CA City & Cnty Second Ser
Issue 29 B Rfdg (FGIC Insd)................. 5.125 05/01/20 7,141,222
5,000 Tobacco Securitization Auth Southn CA Tob
Settlement Ser A1........................... 5.000 06/01/37 5,032,900
1,600 Turlock, CA Hlth Fac Rev Ctf Partn Emanuel
Med Ctr Inc................................. 5.375 10/15/34 1,676,752
5,000 West Contra Costa CA Uni Election of 2002
Ser B (FSA Insd)............................ 5.000 08/01/26 5,252,500
------------
99,057,859
------------
</Table>
See Notes to Financial Statements 15
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
COLORADO 6.2%
$2,840 Adams Cnty, CO Single Family Mtg Rev Ser A
(Escrowed to Maturity) (c).................. 8.875% 08/01/10 $ 3,359,890
5,000 Arapahoe Cnty, CO Wtr & Waste Proj Ser A
(MBIA Insd)................................. 5.125 12/01/32 5,293,450
5,000 Colorado Ed & Cultural Fac Auth Rev Impt
Charter Sch Peak to Peak Rfdg (XLCA Insd)... 5.250 08/15/34 5,336,700
3,000 Colorado Hlth Fac Auth Rev Convenant
Retirement Cmntys Inc....................... 5.000 12/01/35 3,047,250
1,000 Colorado Hlth Fac Auth Rev Evangelical
Lutheran Ser A.............................. 5.250 06/01/34 1,041,420
5,000 Colorado Springs, CO Util Rev Sys Sub Lien
Impt Ser A Rfdg............................. 5.000 11/15/21 5,278,150
5,000 Colorado Springs, CO Util Rev Sys Sub Lien
Impt Ser A Rfdg............................. 5.000 11/15/29 5,179,050
1,530 Dove Vly Metro Dist CO Arapahoe Cnty Rfdg
(FSA Insd).................................. 5.000 11/01/25 1,629,373
15,000 E 470 Pub Hwy Auth CO Rev Cap Apprec Sr Ser
B (MBIA Insd)............................... * 09/01/20 8,250,600
1,500 Park Creek Metro Dist CO Rev Sr Ltd Tax Ppty
Tax Rfdg.................................... 5.500 12/01/37 1,576,620
1,000 Salida, CO Hosp Dist Rev (e)................ 5.250 10/01/36 994,760
------------
40,987,263
------------
CONNECTICUT 1.4%
2,785 Bridgeport, CT Rol Ser II R 182 (Inverse
Fltg) (Acquired 07/09/02, Cost $3,177,971)
(FGIC Insd) (b) (c)......................... 6.899 08/15/15 3,292,009
2,950 Bridgeport, CT Rol Ser II R (Inverse Fltg)
(Acquired 07/09/02, Cost $3,323,232) (FGIC
Insd) (b) (c)............................... 6.899 08/15/16 3,474,008
2,470 Mashantucket Western Pequot Tribe CT Spl Rev
Ser A (Prerefunded @ 09/01/07) (d).......... 6.400 09/01/11 2,559,315
------------
9,325,332
------------
DISTRICT OF COLUMBIA 1.3%
5,150 District Columbia Tax Incrmnt Gallary Place
Proj (FSA Insd)............................. 5.250 07/01/27 5,469,557
3,000 Metropolitan Washington DC Arpt Auth Sys Ser
A (AMT) (FGIC Insd)......................... 5.250 10/01/32 3,146,190
------------
8,615,747
------------
FLORIDA 5.2%
5,000 Broward Cnty, FL Arpt Sys Rev Ser J-I (AMT)
(AMBAC Insd)................................ 5.250 10/01/26 5,240,950
1,100 Capital Tr Agy FL Rev Ft Lauderdale
Proj (AMT).................................. 5.750 01/01/32 1,153,251
9,000 Dade Cnty, FL Gtd Entitlement Rev Cap Apprec
Ser A Rfdg (MBIA Insd)...................... * 02/01/18 4,666,140
</Table>
16 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 570 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd)....................................... 5.950% 07/01/20 $ 596,938
1,000 Halifax Hosp Med Ctr FL Hosp Rev Impt Ser A
Rfdg........................................ 5.250 06/01/26 1,056,220
6,385 Lake Cnty, FL Sch Brd Ctf Partn (Prerefunded
@ 07/01/12) (AMBAC Insd).................... 5.375 07/01/16 6,974,272
595 Orange Cnty, FL Tourist Dev Tax Rev
(Escrowed to Maturity) (AMBAC Insd)......... 6.000 10/01/16 598,463
12,860 Orlando, FL Util Commn Wtr Rfdg............. 5.250 10/01/19 13,830,544
------------
34,116,778
------------
GEORGIA 1.4%
2,000 Atlanta, GA Tax Alloc Eastside Proj Ser B... 5.600 01/01/30 2,066,460
6,310 Municipal Elec Auth GA Combustion Turbine
Ser A (MBIA Insd)........................... 5.250 11/01/17 6,811,834
5 Municipal Elec Auth GA Combustion Turbine
Ser A (Prerefunded @ 11/01/12) (MBIA
Insd)....................................... 5.250 11/01/17 5,452
------------
8,883,746
------------
ILLINOIS 7.7%
1,500 Bolingbrook, IL Sales Tax Rev............... 6.250 01/01/24 1,457,220
500 Chicago, IL Increment Alloc Rev Diversey/
Narrangansett Proj (Acquired 08/01/06, Cost
$533,660) (b)............................... 7.460 02/15/26 536,160
3,000 Chicago, IL Lakefront Millennium Pkg Fac
(MBIA Insd)................................. 5.650 01/01/19 3,316,500
1,000 Chicago, IL Metro Wtr Reclamation Dist Gtr
Chicago (Escrowed to Maturity).............. 7.000 01/01/11 1,097,370
8,050 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien C-2 Rfdg (AMT) (XLCA Insd)....... 5.250 01/01/34 8,409,513
1,200 Chicago, IL Proj & Rfdg Ser C (FGIC Insd)
(c)......................................... 5.750 01/01/16 1,296,780
2,010 Chicago, IL Proj & Rfdg Ser C (Prerefunded @
07/01/10) (FGIC Insd) (c)................... 5.750 01/01/16 2,182,800
40 Chicago, IL Single Family Mtg Rev Ser A
(AMT) (GNMA Collateralized)................. 7.000 09/01/27 41,086
945 Chicago, IL Tax Increment Alloc Santn Drain
& Ship Canal Ser A.......................... 7.750 01/01/14 971,649
1,000 Cook Cnty, IL Cmnty College Dist No 508
Chicago Ctf Partn (FGIC Insd)............... 8.750 01/01/07 1,012,730
5,000 Cook Cnty, IL Ser A (Prerefunded @ 05/15/11)
(FGIC Insd)................................. 5.500 11/15/31 5,413,600
1,250 Huntley, IL Increment Alloc Rev Huntley
Redev Proj Ser A............................ 8.500 12/01/15 1,271,762
90 Illinois Dev Fin Auth Rev Cmnty Fac Clinic
Altgeld Proj................................ 8.000 11/15/06 90,292
1,000 Illinois Fin Auth Rev Kewanee Hosp Proj..... 5.100 08/15/31 1,014,130
4,700 Illinois Hsg Dev Auth Rev Homeowner Mtg Sub
Ser C-2 (AMT)............................... 5.150 08/01/37 4,863,466
</Table>
See Notes to Financial Statements 17
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$5,000 Illinois St First Ser (FSA Insd)............ 5.250% 12/01/21 $ 5,396,700
9,250 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Rev Cap Apprec McCormick Rfdg (MBIA
Insd) (a)................................... 0/5.400 06/15/19 7,670,933
2,854 Pingree Grove Vlg, IL Spl Svc Area No 1 Spl
Tax Ser 05-1 Cambridge Lakes Proj........... 5.250 03/01/15 2,911,280
550 Volo Village, IL Spl Svc Area No 3 Spl Tax
Symphony Meadows Proj Ser 1................. 6.000 03/01/36 558,377
1,000 Yorkville, IL Utd City Spl Svc Area Spl Tax
No 2004-107 Raintree Vlg IL Proj............ 6.250 03/01/35 1,060,880
------------
50,573,228
------------
INDIANA 2.2%
2,500 Indiana Bd Bk Spl Pgm Hendricks Redev
(Prerefunded @ 02/01/07) (LOC--Canadian
Imperial Bank).............................. 6.200 02/01/23 2,571,700
5,000 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty
Hosp Proj Ser A (AMBAC Insd)................ 5.000 05/01/35 5,214,250
1,880 Indiana Hlth Fac Fin Auth Rev Hoosier Care
Proj Ser A.................................. 7.125 06/01/34 1,915,419
550 Indianapolis, IN Loc Pub Impt Bd Bk Ser D... 6.750 02/01/14 633,138
140 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/11 97,817
140 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/12 90,611
135 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/13 80,949
130 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/14 72,218
130 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/15 66,897
135 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/16 64,360
225 Saint Joseph Cnty, IN Redev Dist Tax
Increment Rev Ser B (c)..................... * 06/30/17 99,365
3,295 Vigo Cnty, IN Elem Sch Bldg First Mtg Impt &
Rfdg (FSA Insd)............................. 5.250 01/10/22 3,514,941
------------
14,421,665
------------
IOWA 1.1%
1,125 Coralville, IA Ctf Partn Ser D.............. 5.250 06/01/26 1,185,998
2,400 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)............................. 5.750 07/01/17 2,478,552
</Table>
18 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
IOWA (CONTINUED)
$1,000 Tobacco Settlement Auth IA Tob Settlement
Rev Ser C................................... 5.375% 06/01/38 $ 1,028,530
2,500 Tobacco Settlement Auth IA Tob Settlement
Rev Ser C................................... 5.625 06/01/46 2,616,725
------------
7,309,805
------------
KANSAS 1.2%
1,000 Lawrence, KS Hosp Rev Lawrence
Mem Hosp.................................... 5.125 07/01/36 1,047,630
6,600 Sedgwick Cnty, KS Uni Sch Dist No 259
Wichita (MBIA Insd) (c)..................... 5.625 09/01/13 7,073,352
------------
8,120,982
------------
MARYLAND 0.3%
600 Maryland St Hlth & Higher Ed Fac Auth Rev
Edenwald Ser A.............................. 5.400 01/01/37 624,744
1,250 Prince Georges Cnty, MD Spl Oblig Natl
Harbor Proj................................. 5.200 07/01/34 1,274,825
------------
1,899,569
------------
MASSACHUSETTS 2.1%
3,500 Massachusetts St Hlth & Ed Fac Auth Rev Ser
G (MBIA Insd)............................... 5.000 07/01/13 3,503,290
2,000 Massachusetts St Hlth & Ed Fac Auth Rev Univ
MA Mem Issue Ser D.......................... 5.000 07/01/33 2,030,320
2,695 Massachusetts St Indl Fin Agy Rev First Mtg
Reeds Landing Proj (a)...................... 7.350/7.450 10/01/28 2,650,856
5,000 Massachusetts St Rites PA 1290-Private
Placement (Inverse Fltg) (Acquired 03/23/05,
Cost $5,458,000) (FSA Insd) (b) (c)......... 6.075 03/01/24 5,624,250
------------
13,808,716
------------
MICHIGAN 3.6%
810 Detroit, MI Loc Dev Fin Auth Tax Increment
Sub Ser C (Acquired 09/08/97, Cost $810,000)
(b)......................................... 6.850 05/01/21 829,238
5,000 Detroit, MI Sew Disp Rev Sr Lien Ser A Rfdg
(FGIC Insd)................................. 5.125 07/01/31 5,241,100
5,000 Michigan St Bldg Auth Rev Fac Pgm Ser II
(Prerefunded @ 10/15/11).................... 5.500 10/15/16 5,445,400
5,000 Michigan St Strategic Fd Detroit Edison Co
Proj Ser C Rfdg (AMT) (XLCA Insd)........... 5.450 12/15/32 5,310,450
1,905 Michigan St Strategic Fd Solid Genesee Pwr
Sta Proj Rfdg (AMT)......................... 7.500 01/01/21 1,904,829
5,000 Western Townships, MI Util Sew Rfdg (MBIA
Insd)....................................... 5.250 01/01/16 5,240,050
------------
23,971,067
------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MINNESOTA 0.4%
$ 550 Inver Grove Heights, MN Nursing Home Rev
Presbyterian Home Care Rfdg................. 5.500% 10/01/33 $ 554,741
2,000 Saint Paul, MN Hsg & Redev Auth Hosp Rev
Hltheast Proj............................... 6.000 11/15/35 2,212,320
------------
2,767,061
------------
MISSOURI 3.7%
1,000 Carthage, MO Hosp Rev....................... 5.750 04/01/22 1,013,880
1,000 Carthage, MO Hosp Rev....................... 5.875 04/01/30 1,016,370
3,000 Kansas City, MO Indl Dev Auth Plaza Lib
Proj........................................ 6.000 03/01/16 3,122,670
2,835 Kansas City, MO Port Auth Fac Riverfront
Park Proj Ser A (c)......................... 5.750 10/01/06 2,835,000
2,275 Missouri JT Muni Elec Util Commn Pwr Proj
Rev Plum Point Proj (MBIA Insd)............. 5.000 01/01/26 2,419,531
1,200 Missouri St Hlth & Ed Fac Auth Rev Sr Living
Fac Lutheran Ser B Rfdg..................... 5.125 02/01/27 1,242,252
385 Saint Louis, MO Tax Increment Rev Scullin
Redev Area Ser A............................ 10.000 08/01/10 427,277
12,500 Springfield, MO Pub Util Rev (FGIC Insd).... 4.500 08/01/36 12,407,875
------------
24,484,855
------------
MONTANA 0.2%
1,000 Forsyth, MT Pollutn Ctl Rev Northwestn Corp
Colstrip Rfdg (AMBAC Insd).................. 4.650 08/01/23 1,023,990
------------
NEBRASKA 0.4%
2,500 University NE Fac Corp Deferred Maintenance
(AMBAC Insd)................................ 5.000 07/15/17 2,731,325
------------
NEVADA 0.7%
4,300 Clark Cnty, NV Indl Dev Rev Southwest Gas
Corp Proj Ser A (AMT) (FGIC Insd)........... 4.750 09/01/36 4,324,553
------------
NEW HAMPSHIRE 0.7%
1,010 New Hampshire Higher Ed & Hlth Fac Auth Rev
(c)......................................... 8.800 06/01/09 1,103,516
480 New Hampshire Higher Ed & Hlth Fac Auth Rev
Daniel Webster College Issue Rfdg (c)....... 6.100 07/01/09 484,066
645 New Hampshire St Business Fin Auth Elec Fac
Rev Plymouth Cogeneration (AMT) (Acquired
06/29/93, Cost $631,308) (b)................ 7.750 06/01/14 659,622
1,000 New Hampshire St Business Fin Auth Rev Alice
Peck Day Hlth Sys Ser A..................... 6.875 10/01/19 1,057,660
1,000 New Hampshire St Tpk Sys Rev Ser A Rfdg
(FGIC Insd)................................. 6.750 11/01/11 1,022,720
------------
4,327,584
------------
</Table>
20 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW JERSEY 5.2%
$3,250 Landis, NJ Swr Auth Swr Rev (Inverse Fltg)
(FGIC Insd)................................. 7.935% 09/19/19 $ 3,949,985
5,055 Middlesex Cnty, NJ Util Auth Swr Rev Ser A
Rfdg (MBIA Insd)............................ 6.250 08/15/10 5,338,990
2,000 New Jersey Econ Dev Auth Rev Cig Tax........ 5.750 06/15/34 2,137,840
1,900 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06)................................... 8.500 11/01/16 1,946,075
565 New Jersey St Tpk Auth Tpk Rev (MBIA
Insd)....................................... 6.500 01/01/16 661,587
190 New Jersey St Tpk Auth Tpk Rev Ser C
(Escrowed to Maturity) (MBIA Insd).......... 6.500 01/01/16 223,020
2,725 New Jersey St Tpk Auth Tpk Rev Ser C
(Escrowed to Maturity) (MBIA Insd).......... 6.500 01/01/16 3,198,578
5,710 New Jersey St Trans Corp Ctf Fed Trans Admin
Gnt Ser A (AMBAC Insd)...................... 5.750 09/15/10 6,050,316
10,000 New Jersey St Trans Corp Ctf Fed Trans Admin
Gnt Ser B (Prerefunded @ 09/15/10) (AMBAC
Insd) (f)................................... 6.000 09/15/15 10,881,200
------------
34,387,591
------------
NEW YORK 13.1%
5,000 Metropolitan Trans Auth NY Rev Ser B (FGIC
Insd)....................................... 5.250 11/15/18 5,466,700
1,000 Nassau Cnty, NY Tob Settlement Corp
Ser A-3..................................... 5.000 06/01/35 1,015,650
1,000 Nassau Cnty, NY Tob Settlement Corp
Ser A-3..................................... 5.125 06/01/46 1,017,480
5,000 New York City Hsg Dev Corp Hsg Multi-Family
Ser K (AMT)................................. 5.000 11/01/37 5,119,000
2,300 New York City Indl Dev Agy Amern Airl JFK
Intl Arpt (AMT)............................. 7.625 08/01/25 2,686,561
1,000 New York City Indl Dev Agy Amern Airl JFK
Intl Arpt (AMT)............................. 7.750 08/01/31 1,180,420
3,000 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A....................... 6.250 03/01/15 3,192,360
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)................................... 6.065 06/15/27 5,634,300
2,975 New York City Ser A......................... 7.000 08/01/07 3,027,330
2,845 New York City Ser B (MBIA Insd)............. 5.875 08/01/15 3,095,502
14,515 New York City Ser B (Prerefunded @ 08/01/10)
(MBIA Insd)................................. 5.875 08/01/15 15,878,829
5,000 New York City Transitional Drivers Ser 307
(Inverse Fltg) (Acquired 11/06/02, Cost
$5,439,826) (AMBAC Insd) (b) (c)............ 6.429 08/01/19 5,798,600
</Table>
See Notes to Financial Statements 21
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$3,000 New York Cnty Tob Tr IV Settlement Pass Thru
Ser A....................................... 5.000% 06/01/42 $ 3,028,170
750 New York Liberty Dev Corp Rev Natl Sports
Museum Proj A (Acquired 08/07/06, Cost
$750,000) (b)............................... 6.125 02/15/19 777,255
695 New York St Dorm Auth Rev Mental
Hlth Ser A.................................. 5.750 02/15/11 714,113
680 New York St Dorm Auth Rev Mental
Hlth Ser A.................................. 5.750 02/15/12 698,700
2,500 New York St Energy Resh & Dev Auth Gas Fac
Rev (Inverse Fltg).......................... 8.700 04/01/20 2,787,100
3,000 New York St Energy Resh & Dev Auth Gas Fac
Rev Brooklyn Union Gas Ser B (Inverse Fltg)
(AMT)....................................... 9.919 07/01/26 3,188,400
10,725 New York St Environmental Fac Rev Fds Second
Resolution (c).............................. 5.000 06/15/20 11,536,346
10,000 Triborough Brdg & Tunl Auth NY Gen Ser B
Rfdg........................................ 5.000 11/15/22 10,567,700
------------
86,410,516
------------
NORTH CAROLINA 1.7%
2,000 Charlotte Mecklenberg Hosp Auth NC Hlthcare
Sys Rev Carolina Hlthcare Sys Ser A......... 5.000 01/15/45 2,065,940
8,500 North Carolina Muni Pwr Agy Ser A
(MBIA Insd)................................. 5.250 01/01/19 9,162,830
------------
11,228,770
------------
OHIO 0.5%
3,340 Adams Cnty Hosp Fac Impt Rev Adams Cnty Hosp
Proj........................................ 6.250 09/01/20 3,424,669
------------
OKLAHOMA 0.4%
2,250 Oklahoma City, OK Pub Ppty Auth Hotel Tax
Rev (FGIC Insd)............................. 5.250 10/01/29 2,437,043
285 Oklahoma Hsg Fin Agy Single Family Rev Mtg
Class B (AMT) (GNMA Collateralized)......... 7.997 08/01/18 297,768
------------
2,734,811
------------
OREGON 1.0%
5,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA
Insd)....................................... 5.250 07/01/22 5,376,950
1,000 Port Morrow, OR Pollutn Ctl Portland Gen A
Rfdg (Variable Rate Coupon)................. 5.200 05/01/33 1,026,150
------------
6,403,100
------------
</Table>
22 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
PENNSYLVANIA 1.0%
$1,000 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj................... 6.250% 02/01/35 $ 1,064,660
5,250 Philadelphia, PA Auth Indl Rev Ser B
(FSA Insd).................................. 5.500 10/01/16 5,726,910
------------
6,791,570
------------
RHODE ISLAND 0.5%
915 Rhode Island St Econ Dev Corp Rev (c)....... 7.250 07/01/10 943,081
2,000 Rhode Island St Hlth & Ed Bldg Higher Ed
Johnson & Wales Rfdg (XLCA Insd)............ 5.375 04/01/19 2,162,460
------------
3,105,541
------------
SOUTH CAROLINA 0.2%
700 Piedmont Muni Pwr Agy SC Elec Rev Rfdg...... 5.000 01/01/25 700,098
500 South Carolina Jobs Econ Dev Auth Hlth Fac
Rev First Mtg Wesley Commons Rfdg (e)....... 5.125 10/01/26 499,690
------------
1,199,788
------------
SOUTH DAKOTA 0.2%
1,250 South Dakota St Hlth & Ed Fac Auth Rev Sioux
Vly Hosp & Hlth Sys Ser A................... 5.250 11/01/34 1,311,888
------------
TENNESSEE 0.9%
1,000 Chattanooga, TN Hlth Ed & Hsg Fac Brd Rev
CDFI Phase I LLC Proj Ser A Rfdg............ 5.000 10/01/25 1,008,300
4,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp
Ser B Impt & Rfdg (MBIA Insd)............... 7.750 07/01/29 4,859,560
------------
5,867,860
------------
TEXAS 10.7%
2,000 Alliance Arpt Auth Inc TX Spl Fac Rev Fedex
Corp Proj Rfdg (AMT)........................ 4.850 04/01/21 2,022,160
500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev
Saint Luke's Lutheran Hosp (Escrowed to
Maturity)................................... 7.000 05/01/21 653,145
3,170 Brazos Riv Auth TX Pollutn Ctl Rev Adj Elec
Co Proj Ser C Rfdg
(Variable Rate Coupon) (AMT)................ 5.750 05/01/36 3,371,707
8,410 Comal, TX Indpt Sch Dist Sch Bldg (PSF
Gtd)........................................ 5.000 02/01/31 8,773,985
5,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A
Impt & Rfdg (AMT) (FGIC Insd)............... 5.500 11/01/31 5,336,100
6,065 Harris Cnty, TX Toll Rd Sub Lien Rfdg....... 5.000 08/01/33 6,171,198
5,000 Harris Cnty-Houston, TX Sports Auth Spl Rev
Jr Lien Ser B Rfdg (MBIA Insd).............. 5.250 11/15/40 5,289,300
10,000 Houston, TX Hotel Occupancy Tax Convtn &
Entertnmnt Ser B (AMBAC Insd)............... 5.750 09/01/14 10,933,300
7,500 Lower CO Riv Auth TX Rev Ser A Rfdg (Inverse
Fltg) (Acquired 10/20/99, Cost $7,623,805)
(FSA Insd) (b).............................. 7.775 05/15/14 8,441,400
</Table>
See Notes to Financial Statements 23
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$6,250 Lower CO Riv Auth TX Rev Ser A Rfdg (Inverse
Fltg) (Acquired 10/20/99, Cost $6,312,134)
(FSA Insd) (b).............................. 7.775% 05/15/15 $ 7,047,500
3,250 Lower CO Riv Auth TX Rev Ser A Rfdg (Inverse
Fltg) (Acquired 10/20/99, Cost $3,254,875)
(FSA Insd) (b) (c).......................... 7.775 05/15/16 3,668,048
5,210 Mabank, TX Indpt Sch Dist (PSF Gtd) (c)..... 5.000 08/15/30 5,398,758
2,000 Metropolitan Hlth Fac Dev Corp TX Wilson N
Jones Mem Hosp Proj......................... 7.200 01/01/21 2,077,320
1,175 Texas St Dept Hsg & Cmnty Affairs Home Mtg
Rev Coll Ser C-2 Rfdg (Inverse Fltg) (AMT)
(GNMA Collateralized)....................... 9.977 07/02/24 1,245,065
------------
70,428,986
------------
UTAH 2.0%
1,340 Hildale, UT Elec Rev Gas Turbine Elec
Fac Proj (g)................................ 7.800 09/01/15 413,725
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (g).................................... 8.000 09/01/20 308,750
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (g).................................... 7.800 09/01/25 308,750
11,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc
Rfdg........................................ 6.150 02/15/12 12,119,580
------------
13,150,805
------------
VERMONT 0.3%
1,000 Vermont Econ Dev Auth Mtg Rev Wake Robin
Corp Proj Ser A............................. 5.375 05/01/36 1,013,330
1,000 Vermont Ed & Hlth Bldg Fin Agy Rev
Bennington College Proj..................... 6.625 10/01/29 1,031,750
------------
2,045,080
------------
WASHINGTON 1.3%
8,000 King Cnty, WA Sch Dist No 411
(FGIC Insd) (c)............................. 5.250 12/01/20 8,655,520
------------
WEST VIRGINIA 0.8%
1,500 West Virginia St Hosp Fin Auth Hosp Rev
Bears & Bulls WV Univ Med Corp Rfdg (MBIA
Insd)....................................... 6.100 01/01/18 1,523,925
4,000 West Virginia St Hosp Fin Auth Hosp Rev
Bears & Bulls WV Univ Med Corp Rfdg (MBIA
Insd)....................................... 6.100 01/01/18 4,063,800
------------
5,587,725
------------
TOTAL LONG-TERM INVESTMENTS 98.1%
(Cost $616,008,038)......................................................... 646,054,398
SHORT-TERM INVESTMENTS 0.7%
(Cost $5,000,000)........................................................... 5,000,000
------------
</Table>
24 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
DESCRIPTION VALUE
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 98.8%
(Cost $621,008,038)............................................................. $651,054,398
OTHER ASSETS IN EXCESS OF LIABILITIES $1.2%...................................... 7,781,990
------------
NET ASSETS 100.0%................................................................ $658,836,388
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(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 10.7% of net
assets.
(c) The Fund owns 100% of the outstanding bond issuance.
(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) Securities purchased on a when-issued or delayed delivery basis.
(f) All or a portion of this security has been physically segregated in
connection with open futures contracts.
(g) Non-income producing security.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
FGIC--Financial Guaranty Insurance Co.
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 25
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
FUTURES CONTRACTS OUTSTANDING AS OF SEPTEMBER 30, 2006:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS
U.S. Treasury Notes 10-Year Futures December 2006
(Current Notional Value of $108,063 per contract)......... 35 $(48,812)
== ========
</Table>
26 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2006
<Table>
ASSETS:
Total Investments (Cost $621,008,038)....................... $651,054,398
Cash........................................................ 792,562
Receivables:
Interest.................................................. 8,312,567
Investments Sold.......................................... 1,923,667
Fund Shares Sold.......................................... 828,691
Variation Margin on Futures............................... 3,281
Other....................................................... 220,803
------------
Total Assets............................................ 663,135,969
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,496,809
Fund Shares Repurchased................................... 1,166,796
Income Distributions...................................... 677,357
Investment Advisory Fee................................... 261,782
Distributor and Affiliates................................ 217,900
Trustees' Deferred Compensation and Retirement Plans........ 288,550
Accrued Expenses............................................ 190,387
------------
Total Liabilities....................................... 4,299,581
------------
NET ASSETS.................................................. $658,836,388
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $655,563,243
Net Unrealized Appreciation................................. 29,997,548
Accumulated Undistributed Net Investment Income............. 5,044,228
Accumulated Net Realized Loss............................... (31,768,631)
------------
NET ASSETS.................................................. $658,836,388
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $613,615,593 and 41,355,868 shares of
beneficial interest issued and outstanding)............. $ 14.84
Maximum sales charge (4.75%* of offering price)......... .74
------------
Maximum offering price to public........................ $ 15.58
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $29,563,546 and 1,995,246 shares of
beneficial interest issued and outstanding)............. $ 14.82
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $14,270,631 and 964,658 shares of
beneficial interest issued and outstanding)............. $ 14.79
============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $1,386,618 and 93,483 shares of beneficial
interest issued and outstanding)........................ $ 14.83
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 27
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended September 30, 2006
<Table>
INVESTMENT INCOME:
Interest.................................................... $33,659,476
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,111,809
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,470,199, $337,935 and $134,262,
respectively)............................................. 1,942,396
Shareholder Services........................................ 393,231
Legal....................................................... 66,026
Custody..................................................... 42,512
Trustees' Fees and Related Expenses......................... 39,689
Other....................................................... 423,834
-----------
Total Expenses.......................................... 6,019,497
Less Credits Earned on Cash Balances.................... 25,960
-----------
Net Expenses............................................ 5,993,537
-----------
NET INVESTMENT INCOME....................................... $27,665,939
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(5,898,296)
Futures................................................... 707,834
-----------
Net Realized Loss........................................... (5,190,462)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 19,006,762
-----------
End of the Period:
Investments............................................. 30,046,360
Futures................................................. (48,812)
-----------
29,997,548
-----------
Net Unrealized Appreciation During the Period............... 10,990,786
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,800,324
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $33,466,263
===========
</Table>
28 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
----------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 27,665,939 $ 28,142,888
Net Realized Gain/Loss............................. (5,190,462) 7,645,862
Net Unrealized Appreciation/Depreciation During the
Period........................................... 10,990,786 (11,721,452)
------------ ------------
Change in Net Assets from Operations............... 33,466,263 24,067,298
------------ ------------
Distributions from Net Investment Income:
Class A Shares................................... (26,130,470) (26,358,317)
Class B Shares................................... (1,254,229) (1,598,728)
Class C Shares................................... (498,465) (476,845)
Class I Shares................................... (60,090) (7,693)
------------ ------------
Total Distributions................................ (27,943,254) (28,441,583)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... 5,523,009 (4,374,285)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......................... 86,101,699 41,515,355
Net Asset Value of Shares Issued Through Dividend
Reinvestment..................................... 19,662,764 19,629,302
Cost of Shares Repurchased......................... (91,989,700) (89,121,245)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... 13,774,763 (27,976,588)
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS.............. 19,297,772 (32,350,873)
NET ASSETS:
Beginning of the Period............................ 639,538,616 671,889,489
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $5,044,228
and $770,696, respectively)...................... $658,836,388 $639,538,616
============ ============
</Table>
See Notes to Financial Statements 29
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS A SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $14.71 $14.81 $14.84 $15.03 $14.56
------ ------ ------ ------ ------
Net Investment Income...................... .64(a) .64(a) 66(a) .67(a) .71
Net Realized and Unrealized Gain/Loss...... .14 (.09) (.05) (.19) .46
------ ------ ------ ------ ------
Total from Investment Operations............. .78 .55 .61 .48 1.17
Less Distributions from Net
Investment Income.......................... .65 .65 .64 .67 .70
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $14.84 $14.71 $14.81 $14.84 $15.03
====== ====== ====== ====== ======
Total Return (b)............................. 5.46% 3.78% 4.20% 3.31% 8.35%
Net Assets at End of the Period
(In millions).............................. $613.6 $587.6 $609.4 $658.5 $696.4
Ratio of Expenses to Average Net Assets...... .89% .88% .89% .88% .87%
Ratio of Net Investment Income to Average Net
Assets..................................... 4.40% 4.35% 4.46% 4.53% 4.89%
Portfolio Turnover........................... 18% 39% 15% 46% 49%
</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. 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.
30 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS B SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $14.69 $14.79 $14.82 $15.02 $14.54
------ ------ ------ ------ ------
Net Investment Income...................... .53(a) .53(a) .55(a) .56(a) .60
Net Realized and Unrealized Gain/Loss...... .14 (.09) (.05) (.20) .48
------ ------ ------ ------ ------
Total from Investment Operations............. .67 .44 .50 .36 1.08
Less Distributions from Net
Investment Income.......................... .54 .54 .53 .56 .60
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $14.82 $14.69 $14.79 $14.82 $15.02
====== ====== ====== ====== ======
Total Return (b)............................. 4.69% 3.03% 3.41% 2.48% 7.64%
Net Assets at End of the Period
(In millions).............................. $ 29.6 $ 38.1 $ 48.8 $ 58.4 $ 65.0
Ratio of Expenses to Average Net Assets...... 1.64% 1.63% 1.64% 1.63% 1.62%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.64% 3.60% 3.71% 3.78% 4.13%
Portfolio Turnover........................... 18% 39% 15% 46% 49%
</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.
See Notes to Financial Statements 31
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS C SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $14.67 $14.77 $14.80 $15.00 $14.52
------ ------ ------ ------ ------
Net Investment Income...................... .53(a) .53(a) .55(a) .56(a) .60
Net Realized and Unrealized Gain/Loss...... .13 (.09) (.05) (.20) .48
------ ------ ------ ------ ------
Total from Investment Operations............. .66 .44 .50 .36 1.08
Less Distributions from Net Investment
Income..................................... .54 .54 .53 .56 .60
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $14.79 $14.67 $14.77 $14.80 $15.00
====== ====== ====== ====== ======
Total Return (b)............................. 4.62% 3.03% 3.43% 2.48% 7.65%
Net Assets at End of the Period
(In millions).............................. $ 14.3 $ 12.5 $ 13.7 $ 17.0 $ 18.8
Ratio of Expenses to Average
Net Assets................................. 1.64% 1.63% 1.64% 1.63% 1.62%
Ratio of Net Investment Income to Average
Net Assets................................. 3.65% 3.60% 3.71% 3.78% 4.13%
Portfolio Turnover........................... 18% 39% 15% 46% 49%
</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.
32 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
AUGUST 12, 2005
(COMMENCEMENT OF
CLASS I SHARES YEAR ENDED OPERATIONS) TO
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
----------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............. $14.71 $14.71
------ ------
Net Investment Income (a).......................... .68 .09
Net Realized and Unrealized Gain................... .13 -0-**
------ ------
Total from Investment Operations..................... .81 .09
Less Distributions from Net Investment Income........ .69 .09
------ ------
NET ASSET VALUE, END OF THE PERIOD................... $14.83 $14.71
====== ======
Total Return (b)..................................... 5.65% .60%*
Net Assets at End of the Period (In millions)........ $ 1.4 $ 1.3
Ratio of Expenses to Average Net Assets.............. .64% .66%
Ratio of Net Investment Income to Average Net
Assets............................................. 4.67% 4.56%
Portfolio Turnover................................... 18% 39%
</Table>
* Non-Annualized
** Amount is less than $.01.
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns 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 33
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006
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 Fund offers Class A Shares, Class B Shares,
Class C Shares and Class I Shares. Each class of shares differs by its initial
sales load, contingent deferred sales charges, the allocation of class-specific
expenses and voting rights on the matters affecting a single class.
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 September 30, 2006, the Fund had $1,496,809 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
34
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 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. During the current fiscal year, the Fund utilized capital losses carried
forward of $898,417. At September 30, 2006, the Fund had an accumulated capital
loss carryforward for tax purposes of $21,157,577, which will expire according
to the following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$4,180,889.................................................. September 30, 2008
9,728,055.................................................. September 30, 2009
7,248,633.................................................. September 30, 2010
</Table>
At September 30, 2006, the cost and related gross unrealized appreciation
and depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $620,865,903
============
Gross tax unrealized appreciation........................... $ 32,696,710
Gross tax unrealized depreciation........................... (2,508,215)
------------
Net tax unrealized appreciation on investments.............. $ 30,188,495
============
</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 gains on futures transactions. All
short-term capital gains and a portion of futures gains are included in ordinary
income for tax purposes.
The tax character of distributions paid during the years ended September 30,
2006 and 2005 was as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $ 105,229 $ 117,584
Tax-exempt income......................................... 27,858,452 28,382,892
Long-term capital gain.................................... -0- -0-
----------- -----------
$27,963,681 $28,500,476
=========== ===========
</Table>
Due to inherent differences in the recognition of income, expenses and
realized gains/ losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities. A permanent book and tax difference related to the
Fund's investment in other regulated investment companies totaling $7,760 was
reclassified from accumulated undistributed net investment income to accumulated
net realized loss. A permanent book and tax difference related to the sale of a
payment-in-kind security totaling $4,525,006 was reclassified from accumulated
undistributed
35
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
net investment income to accumulated net realized loss. Additionally, a
permanent book and tax difference of $33,601 related to book to tax accretion
differences was reclassified from accumulated undistributed net investment
income to accumulated net realized loss.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 35,026
Undistributed tax-exempt income............................. 6,959,489
</Table>
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of post-October losses of $10,955,598 which are
not recognized for tax purposes until the first day of the following fiscal year
and gains or losses recognized for tax purposes on open futures transactions on
September 30, 2006.
F. EXPENSE REDUCTIONS During the year ended September 30, 2006, the Fund's
custody fee was reduced by $25,960 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 year ended September 30, 2006, the Fund recognized expenses of
approximately $14,500 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 Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment Agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the year ended September 30,
2006, the Fund recognized expenses of approximately $98,500 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Legal" expenses on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses 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 year ended
September 30, 2006, the Fund recognized expenses of approximately $306,100
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
36
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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 $184,427 are included in
"Other" assets on the Statement of Assets and Liabilities at September 30, 2006.
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.
For the year ended September 30, 2006, Van Kampen as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $155,900 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $59,800. Sales charges do not represent expenses of the
Fund.
3. CAPITAL TRANSACTIONS
For the years ended September 30, 2006 and 2005, transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A........................... 5,173,374 $ 75,736,363 2,412,267 $ 35,680,084
Class B........................... 308,856 4,508,963 177,415 2,622,903
Class C........................... 366,639 5,340,515 130,335 1,918,515
Class I........................... 35,407 515,858 87,953 1,293,853
---------- ------------ ---------- ------------
Total Sales......................... 5,884,276 $ 86,101,699 2,807,970 $ 41,515,355
========== ============ ========== ============
Dividend Reinvestment:
Class A........................... 1,258,124 $ 18,406,616 1,233,680 $ 18,241,199
Class B........................... 57,246 835,581 69,165 1,021,344
Class C........................... 24,712 360,477 24,348 359,067
Class I........................... 4,107 60,090 521 7,692
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 1,344,189 $ 19,662,764 1,327,714 $ 19,629,302
========== ============ ========== ============
Repurchases:
Class A........................... (5,014,627) $(73,329,393) (4,851,772) $(71,717,331)
Class B........................... (965,243) (14,079,445) (952,114) (14,055,751)
Class C........................... (281,046) (4,104,067) (225,130) (3,317,881)
Class I........................... (32,456) (476,795) (2,049) (30,282)
---------- ------------ ---------- ------------
Total Repurchases................... (6,293,372) $(91,989,700) (6,031,065) $(89,121,245)
========== ============ ========== ============
</Table>
37
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the year ended September 30,
2006, the Fund received redemption fees of approximately $400, which are
reported as part of "Cost of Shares Repurchased" on the Statement of Changes in
Net Assets. The per share impact from redemption fees paid to the Fund was less
than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $121,665,813 and $115,130,385,
respectively.
6. 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 may use derivative instruments for a variety of reasons, 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
counterparties to meet the terms of their contracts.
Summarized below are the different types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures on U.S. Treasury Notes and
typically closes the contract prior to delivery date. Upon entering into futures
contracts, the Fund maintains an amount of cash or liquid securities with a
value equal to a percentage of the contract amount with either a futures
commission merchant pursuant to rules and regulations promulgated under the 1940
Act, as amended, or with its custodian in an account in the broker's name. This
amount is known as initial margin. During the period the futures contract is
open, payments are received from or made to the broker based upon changes in the
value of the contract (the variation margin). 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 year ended September 30, 2006,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2005........................... 438
Futures Opened.............................................. 1,380
Futures Closed.............................................. (1,783)
------
Outstanding at September 30, 2006........................... 35
======
</Table>
38
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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 specific factor. As the floating rate rises, the coupon is
reduced. Conversely, as the floating rate declines, the coupon is increased. The
price of these securities may be more volatile than the price of a comparable
fixed rate security. These instruments are typically used by the Fund to enhance
the yield of the portfolio. These instruments are identified in the Portfolio of
Investments.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees 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. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $2,456,400 and $208,700
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, the distribution fee is
reduced.
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action 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 Van Kampen 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
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal, which is located at the back of this Report.
39
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
9. 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.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The impact to the Fund's financial
statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
40
VAN KAMPEN MUNICIPAL INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
Van Kampen Municipal Income Fund
We have audited the accompanying statement of assets and liabilities of Van
Kampen Municipal Income Fund (the "Fund"), including the portfolio of
investments, as of September 30, 2006, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen Municipal Income Fund at September 30, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
November 14, 2006
41
VAN KAMPEN 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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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
One Lincoln Street
Boston, Massachusetts 02111
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
For Federal income tax purposes, the following information is furnished with
respect to the distribution paid by the Fund during its taxable year ended
September 30, 2006. The Fund designated 99.6% of the income distributions as a
tax-exempt income distribution. In January, the Fund provides tax information
to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
42
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
43
<Table>
<Caption>
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
44
<Table>
<Caption>
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1993 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
45
<Table>
<Caption>
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1990 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing
(64) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
46
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 1990 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
47
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
</Table>
48
<Table>
<Caption>
VAN KAMPEN MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
</Table>
49
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen -- as well as several other
decisions by other judges in the Southern District of New York and certain other
courts that have dismissed similar complaints against other investment funds --
plaintiff in the derivative action has determined that the suit would be
unsuccessful, if pursued further. Accordingly, plaintiff has asked Judge Owen to
dismiss the action. No attorneys' fees will be paid by defendants and no
consideration will be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than December 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen Municipal Income Fund
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.
(continued on next page)
Van Kampen Municipal Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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, 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
(continued on back)
Van Kampen Municipal Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
49, 349, 549
MIF ANR 11/06
(VAN KAMPEN INVESTMENTS LOGO) RN06-03169P-Y09/06
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Intermediate Term Municipal Income Fund performed during the 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 September 30, 2006.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I [AND R] SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUSES CONTAIN INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. 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 9/30/06
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Municipal Bond Index from 9/30/96 through 9/30/06. Class A shares, adjusted for
sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN INTERMEDIATE TERM LEHMAN BROTHERS MUNICIPAL BOND
INCOME FUND INDEX
---------------------------- ------------------------------
9/96 9529 10000
9623 10113
9764 10298
9735 10255
9744 10274
9830 10369
9743 10230
9800 10316
9916 10471
10003 10583
10227 10876
10177 10774
9/97 10275 10902
10344 10972
10393 11037
10522 11197
10602 11313
10623 11316
10663 11326
10623 11275
10786 11454
10817 11499
10838 11528
10972 11706
9/98 11086 11852
11086 11851
11118 11893
11150 11923
11265 12065
11234 12012
11248 12029
11283 12059
11243 11989
11108 11816
11154 11859
11071 11764
9/99 11075 11769
10969 11642
11060 11765
10976 11678
10921 11627
10988 11762
11110 12019
11100 11948
11089 11886
11291 12201
11435 12371
11557 12561
9/00 11532 12496
11393 12632
11448 12728
11690 13042
11788 13172
11840 13213
11985 13332
11875 13187
11997 13329
12061 13418
12185 13617
12379 13842
9/01 12361 13795
12510 13959
12373 13842
12283 13711
12457 13949
12607 14117
12384 13840
12644 14111
12711 14196
12851 14346
13016 14531
13145 14705
9/02 13410 15028
13194 14778
13150 14717
13415 15028
13346 14990
13541 15199
13547 15208
13655 15309
13915 15667
13801 15601
13419 15055
13560 15167
9/03 13856 15613
13792 15534
13948 15696
14049 15826
14076 15917
14286 16156
14182 16100
13919 15719
13906 15662
13947 15719
14107 15926
14334 16245
9/04 14389 16331
14483 16472
14376 16336
14557 16535
14680 16690
14626 16634
14504 16529
14710 16790
14807 16909
14876 17013
14822 16937
14961 17108
9/05 14864 16992
14782 16889
14852 16970
14966 17116
15009 17162
15095 17278
14996 17158
14983 17153
15055 17229
14998 17164
15157 17368
15345 17626
9/06 15446 17749
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
5/28/93 5/28/93 10/19/93 8/12/05
- --------------------------------------------------------------------------------------------------------
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 W/O SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 5.28% 4.90% 4.82% 4.82% 4.26% 4.26% 3.93%
10-year 4.95 4.44 4.38 4.38 4.18 4.18 --
5-year 4.56 3.54 4.25 4.00 3.80 3.80 --
1-year 3.91 -0.99 4.13 0.13 3.04 2.05 4.08%
- --------------------------------------------------------------------------------------------------------
SEC Yield 3.10% 3.25% 2.53% 3.50%
- --------------------------------------------------------------------------------------------------------
Unsubsidized SEC Yield 3.00% 3.15% 2.43% 3.40%
</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.
BECAUSE CLASS B SHARES INCURRED LOWER EXPENSES UNDER THE 12B-1 PLAN THAN DID
CLASS A SHARES FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 2006, THE TOTAL
OPERATING EXPENSE RATIO FOR CLASS B SHARES WAS LOWER AND, AS A RESULT, THE
PERFORMANCE OF CLASS B SHARES WAS HIGHER THAN THAT OF CLASS A SHARES. THERE CAN
BE NO ASSURANCE THAT THIS WILL CONTINUE TO OCCUR IN THE FUTURE AS THE MAXIMUM
FEES PAYABLE BY CLASS B SHARES UNDER THE 12B-1 PLAN ARE HIGHER THAN THOSE
PAYABLE BY CLASS A SHARES.
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 years one and two and
declining to zero after year five), a contingent deferred sales charge of 1.00
percent for Class C shares in year one and combined Rule 12b-1 fees and service
fees of up to 0.25 percent for Class A shares and 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 eight years after purchase.
The since inception returns for Class C shares reflect the conversion
1
of Class C shares into Class A shares ten years after purchase. Class I shares
are available for purchase exclusively by investors through (i) tax-exempt
retirement plans with assets of at least $1 million (including 401(k) plans, 457
plans, employer sponsored 403(b) plans, profit sharing and money purchase plans,
defined benefit plans and non-qualified deferred compensation plans), (ii)
fee-based investment programs with assets of at least $1 million and (iii)
institutional clients with assets of at least $1 million. Class I shares are
offered without any sales charges on purchases or sales and do not include
combined Rule 12b-1 fees and service fees. 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 nonincome
items as prescribed by the SEC. The unsubsidized 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.
2
Fund Report
FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
MARKET CONDITIONS
Against the backdrop of strong economic growth, good employment data, and
inflationary pressures stemming from rising oil prices, the Federal Open Market
Committee (the "Fed") continued its tightening campaign during the first nine
months of the reporting period, raising the federal funds target rate six times
to 5.25 percent at the end of June. As the months progressed however, economic
growth moderated as consumer spending and housing weakened while inflation
concerns eased, prompting investors to speculate that the Fed would take a break
from rate increases. In August the Fed did pause, ending a two-year run of 17
consecutive rate increases--the longest stretch of increases in 25 years. At its
September meeting, the Fed again kept its target rate unchanged, and indicated
that any future rate increases would be driven by the weight of economic data.
As a result of the improved outlook for the fixed income market, yields on
longer-maturity municipal bonds fell dramatically in latter months of the
reporting year, ultimately ending at the lowest level in decades. Yields on
shorter-maturity municipal bonds, however, moved higher. Accordingly, the slope
of the municipal yield curve flattened as the spread between short-term and
long-term interest rates narrowed.
Demand for municipal bonds continued to be strong during the period. In fact,
inflows into municipal bond funds were 45 percent higher year-to-date through
September than for the same period last year, much of which went into high yield
funds. Because prevailing interest rates were still at relatively low levels,
investors increasingly sought out lower-quality, higher yielding bonds. The
increased demand for high yield bonds led this segment of the market to
considerably outperform high-grade issues. In addition, long-term bonds
continued to earn the best returns, while the short end of the curve posted the
lowest returns as Fed rate increases moved yields in this portion of the curve
higher.
Although municipal bond issuance remained brisk in the last quarter of 2005,
volume declined throughout the remaining months of the period. As of the end of
September, national municipal bond issuance was down 14 percent for 2006. The
reduced supply, coupled with growing demand, further fueled municipal bond
performance.
3
PERFORMANCE ANALYSIS
The fund returned 3.91 percent for the 12 months ended September 30, 2006 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark,
the Lehman Brothers Municipal Bond Index, returned 4.45 percent for the period.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN
BROTHERS
MUNICIPAL
CLASS A CLASS B CLASS C CLASS I BOND INDEX
3.91% 4.13% 3.04% 4.08% 4.45%
- --------------------------------------------------------------
</Table>
The performance for the four 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.
Because Class B shares incurred lower expenses under the 12b-1 Plan than did
Class A shares for the fiscal period ended September 30, 2006, the total
operating expense ratio for Class B shares was lower and, as a result, the
performance of Class B shares was higher than that of Class A shares. There can
be no assurance that this will continue to occur in the future as the maximum
fees payable by Class B shares under the 12b-1 Plan are higher than those
payable by Class A shares.
We sought opportunities to enhance the portfolio's yield, selectively adding
bonds to the portfolio that we believed were both attractively valued and
offered greater future total return prospects. This led us to lower the fund's
exposure to AA rated bonds, investing the proceeds into higher-yielding A and
BBB rated bonds. As a result, the fund was overweighted versus the Lehman
Brothers Municipal Bond Index in BBB and non-rated bonds, which proved
advantageous as this portion of the market outperformed higher-rated bonds.
Despite this shift in credit allocation, however, the fund's overall credit
quality remained high.
The fund's yield-curve positioning also contributed positively to performance.
We emphasized the long end of the fund's investment range, favoring bonds with
maturities of 10 to 15 years, which served the fund well as longer-maturity
issues outperformed those with shorter maturities. It's important to note that
the fund has, by nature, a shorter average maturity than that of the Lehman
Brothers Municipal Bond Index, which is a long-term index, and as such, could
not benefit as much from rising prices on the very long end of the curve. The
fund's comparatively shorter duration (a measure of interest-rate sensitivity)
was also a factor in its underperformance versus the Lehman Brothers Municipal
Bond Index, keeping the fund from more fully participating in the rally later in
the period.
The hospital and tobacco sectors performed particularly well during the period
and the fund's holdings here were additive to performance. The litigation
environment has become favorable for tobacco companies, demand for the
4
bonds remains strong, and the industry continues to prosper. The fund remained
well diversified across the major sectors of the municipal market. As of the
close of the period, public education, retail electric and general purpose bonds
represented the fund's largest sector weightings.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
5
<Table>
<Caption>
RATINGS ALLOCATIONS AS OF 9/30/06
AAA/Aaa 58.1%
AA/Aa 7.7
A/A 6.2
BBB/Baa 10.4
Non-Rated 17.6
<Caption>
TOP FIVE SECTORS AS OF 9/30/06
Public Education 13.1%
Retail Electric 11.0
General Purpose 8.9
Hospital 8.7
Higher Education 7.6
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
Pennsylvania 9.2%
Missouri 8.5
Florida 5.9
New Jersey 5.2
California 5.2
Ohio 4.6
Indiana 4.5
Illinois 4.3
New York 4.0
Alabama 3.9
Texas 3.8
Colorado 3.6
Oregon 3.5
Maryland 3.1
South Carolina 3.0
Michigan 2.7
Arizona 2.4
Tennessee 2.3
New Mexico 2.3
Kansas 2.0
North Carolina 1.6
Nebraska 1.5
Washington 1.5
South Dakota 1.5
West Virginia 1.4
Kentucky 1.0
</Table>
<Table>
(continued on next page)
</Table>
6
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 9/30/06
(continued from previous page)
Virginia 0.9
Connecticut 0.9
Arkansas 0.9
Iowa 0.5
Wisconsin 0.5
Minnesota 0.4
Georgia 0.1
Montana 0.1
Massachusetts 0.1
-----
Total Long-Term Investments 96.9%
Short-Term Investments 3.2
Liabilities in Excess of Other Assets (0.1)
-----
Net Assets 100.0%
</Table>
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. Subject to change daily. 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.
7
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. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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 (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 (800) 847-2424.
8
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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.
9
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 charges on redemptions of Class B and C Shares;
and redemption fees; 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 4/1/06 - 9/30/06.
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
account values and 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 or redemption fees.
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*
------------------------------------------------
4/1/06 9/30/06 4/1/06-9/30/06
Class A
Actual...................................... $1,000.00 $1,029.99 $4.83
Hypothetical................................ 1,000.00 1,020.37 4.81
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,031.91 2.75
Hypothetical................................ 1,000.00 1,022.37 2.74
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,025.22 8.58
Hypothetical................................ 1,000.00 1,016.57 8.54
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 1,030.33 3.46
Hypothetical................................ 1,000.00 1,021.67 3.45
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.95%, 0.54%,
1.69% and 0.68% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period). These ratios reflect an expense waiver.
Assumes all dividends and distributions were reinvested.
10
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
11
together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees
12
discuss with the investment adviser its revenues and expenses, including among
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
13
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
MUNICIPAL BONDS 96.9%
ALABAMA 3.9%
$1,260 Dothan Houston Cnty, AL Arpt Auth (AMT)
(MBIA Insd) (a)................................. 5.400% 12/01/15 $ 1,348,099
1,000 Jefferson Cnty, AL Pub Bldg Auth Lease Rev Wts
(AMBAC Insd).................................... 5.125 04/01/21 1,083,870
1,500 Montgomery Cnty, AL Pub Bldg Auth Rev Wts Fac
Proj (MBIA Insd) (a)............................ 5.000 03/01/23 1,596,735
200 West Jefferson Cnty, AL Amusement & Pub Park
Auth (Prerefunded @ 12/01/06)................... 7.500 12/01/08 204,384
------------
4,233,088
------------
ARIZONA 2.4%
1,000 Arizona St Univ Rev Sys Rfdg (AMBAC Insd)....... 5.000 07/01/20 1,074,340
1,000 Maricopa Cnty, AZ Uni Sch Dist No 48 Scottsdale
Sch Impt Proj Ser B (FSA Insd) (b).............. 4.750 07/01/23 1,047,260
480 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 481,838
------------
2,603,438
------------
ARKANSAS 0.9%
950 University of AR Rev UALR Cap Impt Ser B (FSA
Insd)........................................... 4.500 12/01/19 986,546
------------
CALIFORNIA 5.2%
1,090 California Edl Fac Auth Rev Occidental College
Ser A (MBIA Insd) (a)........................... 5.000 10/01/20 1,177,309
1,000 California St (AMBAC Insd) (a) (c).............. 6.400 09/01/08 1,053,710
1,500 California St Dept Wtr Res Pwr Ser A
(Prerefunded @ 05/01/12) (AMBAC Insd)........... 5.375 05/01/18 1,656,525
565 Perris, CA Pub Fin Auth Rev Tax Alloc (a)....... 4.750 10/01/13 570,023
1,100 Santa Clara, CA Elec Rev Sub Ser A (MBIA
Insd)........................................... 5.250 07/01/20 1,199,308
------------
5,656,875
------------
COLORADO 3.6%
115 Colorado Hlth Fac Auth Rev Sr Living Fac Eaton
Ter Ser A....................................... 6.800 07/01/09 119,735
1,560 Colorado Springs, CO Utils Rev Sys Sub Lien Impt
Ser A........................................... 5.000 11/15/19 1,672,336
1,000 Denver, CO City & Cnty Arpt Rev Ser D Rfdg (AMT)
(FSA Insd)...................................... 5.500 11/15/12 1,077,760
1,000 Denver, CO Convention Ctr Hotel Auth Rev Rfdg
(XLCA Insd)..................................... 5.250 12/01/14 1,101,510
------------
3,971,341
------------
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CONNECTICUT 0.9%
$ 800 Connecticut St Hlth & Edl Fac Auth Rev Griffin
Hosp Ser B (Radian Insd)........................ 5.000% 07/01/11 $ 842,960
165 New Haven, CT Indl Fac Rev Adj Govt Ctr Thermal
Energies (AMT).................................. 7.250 07/01/09 165,945
------------
1,008,905
------------
FLORIDA 5.9%
500 Baywinds Cmnty Dev Dist FL Spl Assmt Ser B...... 4.900 05/01/12 504,720
1,000 Brevard Cnty, FL Sch Brd Ctfs Ser B Rfdg (FGIC
Insd)........................................... 5.000 07/01/20 1,067,120
2,000 Broward Cnty, FL Arpt Sys Rev Ser E Rfdg (AMT)
(MBIA Insd) (c)................................. 5.375 10/01/13 2,077,440
500 Halifax, FL Hosp Med Ctr Rev Impt & Rfdg Ser
A............................................... 5.250 06/01/19 533,360
1,500 Orange Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd)........................................... 5.250 08/01/14 1,628,430
500 Saint Johns Cnty, FL Indl Dev Auth Hlth Care
Glenmoor Proj Ser A (b)......................... 5.000 01/01/16 500,695
115 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj
Rfdg (Escrowed to Maturity)..................... 7.125 11/01/06 115,359
------------
6,427,124
------------
GEORGIA 0.1%
155 Forsyth Cnty, GA Hosp Auth Rev Antic Ctfs GA
Baptist Hlthcare Sys Proj (Escrowed to
Maturity)....................................... 6.000 10/01/08 158,495
------------
ILLINOIS 4.3%
545 Clay Cnty, IL Hosp Rev (Prerefunded @ 12/1/08)
(a)............................................. 5.500 12/01/10 573,160
500 Hodgkins, IL Tax Increment Rev Sr Lien Rfdg..... 5.000 01/01/14 527,000
80 Huntley, IL Spl Svc Area No 7 Spl Tax........... 6.000 03/01/09 81,150
500 Illinois Fin Auth Rev Landing at Plymouth Pl
Proj Ser A...................................... 5.250 05/15/14 505,255
1,000 Illinois Fin Auth Student Hsg Rev MJH Ed
Assistance IV Sr Ser A.......................... 5.500 06/01/19 1,070,570
500 Lincolnshire, IL Spl Svc Area Sedgebrook Proj... 5.000 03/01/11 512,020
130 Peoria, IL Spl Tax Weaverridge Spl Svc Area
(Prerefunded @ 02/01/07)........................ 7.625 02/01/08 134,191
346 Pingree Grove Village, IL Spl Svc Area No 1 Spl
Tax Ser 05-1 Cambridge Lakes Proj............... 5.250 03/01/15 352,944
1,000 Round Lake Beach, IL Tax........................ 4.650 12/15/13 1,011,680
------------
4,767,970
------------
INDIANA 4.5%
1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg
(AMBAC Insd).................................... 5.500 01/01/18 1,086,200
1,000 Carmel Cnty, IN Redev Auth Opt Income Tax Lease
Rent Rev (MBIA Insd)............................ 5.000 07/01/22 1,068,800
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
INDIANA (CONTINUED)
$ 830 Hobart, IN Bldg Corp First Mtg (FGIC Insd)
(a)............................................. 5.500% 07/15/13 $ 918,611
1,400 Indiana Bd Bk Spl Prog Hendricks Redev Ser B
(Prerefunded @ 02/01/07)........................ 6.000 02/01/12 1,439,228
400 Saint Joseph Cnty, IN Econ Dev Rev Holy Cross
Vlg Notre Dame Proj Ser A....................... 5.750 05/15/13 414,828
------------
4,927,667
------------
IOWA 0.5%
500 Coralville, IA Ctfs Partn Ser D................. 5.250 06/01/22 529,515
------------
KANSAS 2.0%
500 Burlington, KS Envrn Impt Rev................... 4.750 09/01/15 504,645
500 Kansas St Dev Fin Auth Hlth Fac Rev Hays Med Ctr
Inc Ser L....................................... 5.250 11/15/16 540,385
1,000 Shawnee Cnty, KS Sch Dist 501 Topeka............ 5.000 02/01/20 1,056,700
120 Wyandotte Cnty, KS City KS Univ Brd of Public
Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/11 127,033
------------
2,228,763
------------
KENTUCKY 1.0%
1,000 Louisville & Jefferson Cnty, KY Ser C (AMT) (FSA
Insd)........................................... 5.500 07/01/17 1,085,500
------------
MARYLAND 3.1%
1,000 Baltimore, MD Convention Ctr Hotel Rev Ser A
(XLCA Insd)..................................... 5.250 09/01/22 1,101,940
1,000 Maryland St Econ Dev Corp Student Hsg Rev Univ
MD College Park Proj Rfdg (CIFG Insd)........... 5.000 06/01/13 1,077,230
625 Maryland St Econ Dev Corp Univ MD College Park
Proj (Escrowed to Maturity)..................... 5.750 06/01/13 698,225
500 Prince Georges Cnty, MD Spl Oblig
Natl Harbor Proj................................ 4.700 07/01/15 509,130
------------
3,386,525
------------
MASSACHUSETTS 0.1%
85 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Escrowed to Maturity) (Acquired
06/24/1998, Cost $85,000) (d)................... 6.200 06/01/08 88,136
------------
MICHIGAN 2.7%
1,000 Brighton, MI Area Sch Dist Rfdg (a)............. 5.250 05/01/18 1,082,870
1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/20 1,082,870
500 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser A... 5.000 07/01/09 511,060
250 Michigan St Strategic Fd Ltd Oblig United Waste
Sys Proj (AMT).................................. 5.200 04/01/10 258,317
------------
2,935,117
------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
MINNESOTA 0.4%
$ 430 Inver Grove Heights, MN Presbyterian Homes Care
Rfdg............................................ 5.000% 10/01/16 $ 429,329
25 Minneapolis, MN Multi-Family Rev Hsg Belmont
Apts Proj (AMT) (a)............................. 7.000 11/01/06 25,004
------------
454,333
------------
MISSOURI 8.5%
500 Carthage, MO Hosp Rev........................... 4.000 04/01/07 499,875
500 Fenton, MO Tax Increment Rev Gravois Bluffs
Redev Proj Rfdg................................. 5.000 04/01/13 524,595
610 Ferguson, MO Tax Increment Rev Crossing at Halls
Ferry Rfdg (a).................................. 5.500 04/01/14 626,781
1,350 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 1,405,202
1,000 Macon, MO Ctfs Partn (MBIA Insd)................ 5.250 08/01/17 1,039,300
830 Missouri St Dev Fin Brd Fac Rev Pub Safety Proj
Ser A (a)....................................... 5.000 03/01/11 863,208
2,125 O' Fallon, MO Ctfs Partn (MBIA Insd) (a)........ 5.375 02/01/18 2,284,715
2,000 Saint Charles, MO Ctf Partn Ser B............... 5.500 05/01/18 2,113,440
------------
9,357,116
------------
MONTANA 0.1%
110 Crow Fin Auth, MT Tribal Purp Rev (Acquired
12/11/1997, Cost $110,000) (d).................. 5.400 10/01/07 110,991
------------
NEBRASKA 1.5%
1,500 University of NE Fac Corp Defd Maint
(AMBAC Insd).................................... 5.000 07/15/17 1,638,795
------------
NEW JERSEY 5.2%
1,400 Essex Cnty, NJ Impt Auth Lease Gtd Cnty
Correctional Fac Proj (Prerefunded @ 10/01/10)
(FGIC Insd)..................................... 5.750 10/01/30 1,514,870
400 New Jersey Econ Dev Auth First Mtg Winchester
Ser A Rfdg...................................... 3.000 11/01/06 399,672
1,500 New Jersey Econ Dev Auth Rev Cigarette Tax...... 5.500 06/15/16 1,636,095
1,000 New Jersey Hlthcare Fac Fin Auth Rev St. Clare's
Hosp Inc Ser A Rfdg (Radian Insd)............... 5.250 07/01/20 1,073,270
455 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.500 02/15/16 486,577
565 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.600 02/15/17 606,646
------------
5,717,130
------------
NEW MEXICO 2.3%
1,000 Jicarilla, NM Apache Nation Rev Ser A (Acquired
10/23/2003, Cost $1,020,380) (d)................ 5.500 09/01/23 1,067,010
1,310 New Mexico Fin Auth Rev Sr Lien Pub Proj
Revolving Fd Ser B (MBIA Insd).................. 5.000 06/01/17 1,431,411
------------
2,498,421
------------
</Table>
See Notes to Financial Statements 17
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
NEW YORK 4.0%
$ 180 Brookhaven, NY Indl Dev Agy Sr Residential Hsg
Rev Woodcrest Estates Fac Ser A (AMT)........... 5.875% 12/01/09 $ 183,627
1,000 Long Island Pwr Auth NY Elec Gen Ser C
(Prerefunded @ 09/01/13)........................ 5.500 09/01/17 1,112,100
500 New York City Indl Dev Agy Rev Liberty 7 World
Trade Ctr Ser A................................. 6.250 03/01/15 532,060
780 New York City Indl Dev Agy Spl Fac Rev Terminal
One Group Assn Proj (AMT)....................... 5.000 01/01/10 805,951
300 New York City Ser A............................. 7.000 08/01/07 305,277
430 New York St Dorm Auth Rev Mt Sinai NYU Hlth Ser
C............................................... 5.000 07/01/11 436,102
5 Niagara Falls, NY Pub Impt (MBIA Insd).......... 6.900 03/01/20 5,014
1,000 Tobacco Settlement Fin Corp NY Ser C-1.......... 5.250 06/01/13 1,026,260
------------
4,406,391
------------
NORTH CAROLINA 1.6%
630 North Carolina Eastn Mun Pwr Agy Pwr Sys Rev Ser
D............................................... 6.450 01/01/14 683,474
1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 1,077,980
------------
1,761,454
------------
OHIO 4.6%
500 Adams Cnty Hosp Fac Impt Rev Adams Cnty Hosp
Proj............................................ 6.250 09/01/20 512,675
500 Athens Cnty, OH Hosp Fac Rev & Impt O' Bleness
Mem Ser A Rfdg.................................. 6.250 11/15/13 525,465
1,370 Cleveland, OH Non Tax Rev Cleveland Stadium Proj
Rfdg (AMBAC Insd)............................... 5.125 12/01/20 1,476,161
500 Dayton, OH Spl Fac Rev Afco Cargo Day LLC Proj
(AMT)........................................... 6.000 04/01/09 503,685
750 Ohio Mun Elec Generation Agy Jt Venture 5 Ctfs
Ben Int Rfdg (AMBAC Insd)....................... 5.000 02/15/21 794,768
1,160 Sugarcreek, OH Loc Sch Dist Sch Impt & Rfdg
(MBIA Insd) (a)................................. 5.250 12/01/18 1,265,050
------------
5,077,804
------------
OREGON 3.5%
2,575 Emerald Peoples Util Dist OR Ser A Rfdg
(FSA Insd) (a).................................. 5.250 11/01/16 2,820,114
1,000 Port Morrow, OR Pollutn Ctl Portland Gen Ser A
Rfdg (Mandatory Put @ 05/01/09)................. 5.200 05/01/33 1,026,150
------------
3,846,264
------------
PENNSYLVANIA 9.2%
500 Allegheny Cnty, PA Indl Dev Auth Lease Rev
Residential Res Inc Proj........................ 5.000 09/01/21 513,365
250 Allegheny Cnty, PA Redev Auth Rev Pittsburgh
Mills Proj...................................... 5.100 07/01/14 257,780
</Table>
18 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$1,120 Canon McMillan Sch Dist PA Ser A Rfdg
(MBIA Insd)..................................... 5.000% 12/15/15 $ 1,211,358
500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj....................... 6.000 02/01/21 531,960
950 Philadelphia, PA Gas Wks Rev Eighteenth Ser (AGL
Insd)........................................... 5.250 08/01/18 1,029,781
900 Philadelphia, PA Gas Wks Rev Third Ser
(FSA Insd)...................................... 5.000 08/01/10 944,199
2,000 Philadelphia, PA Redev Auth Rev Neighborhood
Trans Ser A (FGIC Insd)......................... 5.500 04/15/16 2,184,160
1,090 Wilson, PA Area Sch Dist (FGIC Insd)............ 5.125 03/15/17 1,167,281
2,070 York Cnty, PA Sch Technology (FGIC Insd)........ 5.375 02/15/16 2,266,526
------------
10,106,410
------------
SOUTH CAROLINA 3.0%
1,020 Berkeley Cnty, SC Impt & Rfdg (FSA Insd)........ 5.000 09/01/17 1,093,532
1,000 Kershaw Cnty, SC Pub Sch Fndtn Installment Pwr
Rev Kershaw Cnty Sch Dist Proj (CIFG Insd)...... 5.000 12/01/22 1,067,750
1,065 Lexington, SC Wtr & Swr Rev & Impt Comb Ser A
Rfdg (MBIA Insd) (a)............................ 5.000 04/01/14 1,119,848
------------
3,281,130
------------
SOUTH DAKOTA 1.5%
1,515 Minnehaha Cnty, SD Ctfs Ltd Tax (FSA Insd)...... 5.000 12/01/18 1,624,671
------------
TENNESSEE 2.3%
455 Chattanooga, TN Hlth Edl Hsg Fac CDFI Phase I
LLC Proj Ser A Rfdg............................. 5.000 10/01/15 468,463
700 Franklin, TN Spl Sch Dist Cap Apprec (FSA
Insd)........................................... * 06/01/15 497,868
1,000 Gatlinburg, TN Pub Bldg Auth Rfdg (AMBAC
Insd)........................................... 5.750 12/01/11 1,100,480
500 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev
Trezevant Manor Proj Ser A...................... 5.250 09/01/16 501,245
------------
2,568,056
------------
TEXAS 3.8%
1,000 Alliance Arpt Auth Inc TX Spl Fac Rev Fedex Corp
Proj Rfdg (AMT)................................. 4.850 04/01/21 1,011,080
395 Brazos Riv Auth TX Pollutn Ctl Rev Adj TXU Elec
Co Proj Ser C Rfdg (AMT) (Mandatory Put @
11/01/11)....................................... 5.750 05/01/36 420,134
500 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc
Proj............................................ 5.000 08/15/13 515,905
350 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc
Proj............................................ 5.000 08/15/19 356,794
1,000 Lower Colorado Riv Auth TX LCRA Svcs Corp Proj
Rfdg (FGIC Insd)................................ 5.000 05/15/17 1,048,060
500 Mesquite, TX Hlth Fac Dev Retirement Christian
Care............................................ 5.000 02/15/15 514,835
250 San Antonio, TX Hsg Fin Corp Multi-Family Hsg
Rev Beverly Oaks Apt Proj Ser A (a)............. 7.500 02/01/10 258,203
------------
4,125,011
------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
VIRGINIA 0.9%
$1,000 Tobacco Settlement Fin Corp VA Asset Bkd........ 5.250% 06/01/19 $ 1,039,100
------------
WASHINGTON 1.5%
1,000 Klickitat Cnty, WA Pub Util Dist No 001 Elec Rev
Ser B Rfdg (FGIC Insd).......................... 5.250 12/01/22 1,101,370
510 Skagit Cnty, WA Pub Hosp Dist No 001 Skagit Vly
Hosp............................................ 5.250 12/01/10 528,824
------------
1,630,194
------------
WEST VIRGINIA 1.4%
1,500 West Virginia St Hosp Fin Auth (MBIA Insd)...... 6.100 01/01/18 1,523,925
------------
WISCONSIN 0.5%
500 Wisconsin St Hlth & Edl Fac Beaver Dam Cmnty
Hosp Inc........................................ 5.500 08/15/14 506,070
------------
TOTAL LONG-TERM INVESTMENTS 96.9%
(Cost $103,383,710)....................................................... 106,268,271
SHORT-TERM INVESTMENTS 3.2%
(Cost $3,500,000)......................................................... 3,500,000
------------
TOTAL INVESTMENTS 100.1%
(Cost $106,883,710)....................................................... 109,768,271
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)............................... (102,657)
------------
NET ASSETS 100.0%.......................................................... $109,665,614
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) The Fund owns 100% of the outstanding bond issuance.
(b) Securities purchased on a when-issued or delayed delivery basis.
(c) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(d) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 1.2% of net
assets.
20 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
AGL--Assured Guaranty Ltd.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
CIFG--CDC IXIS Financial Guaranty
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
Radian--Radian Asset Assurance
XLCA--XL Capital Assurance Inc.
FUTURES CONTRACTS OUTSTANDING AS OF SEPTEMBER 30, 2006:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
Short Contracts:
U.S. Treasury Notes 10-Year Futures December 2006
(Current Notional Value of $108,063 per contract)....... 45 $(44,110)
== ========
</Table>
See Notes to Financial Statements 21
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2006
<Table>
ASSETS:
Total Investments (Cost $106,883,710)....................... $109,768,271
Cash........................................................ 78,447
Receivables:
Interest.................................................. 1,443,558
Investments Sold.......................................... 399,800
Fund Shares Sold.......................................... 51,806
Variation Margin on Futures............................... 4,219
Other....................................................... 145,684
------------
Total Assets............................................ 111,891,785
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,536,514
Fund Shares Repurchased................................... 266,950
Income Distributions...................................... 78,742
Investment Advisory Fee................................... 36,119
Distributor and Affiliates................................ 11,861
Trustees' Deferred Compensation and Retirement Plans........ 210,514
Accrued Expenses............................................ 85,471
------------
Total Liabilities....................................... 2,226,171
------------
NET ASSETS.................................................. $109,665,614
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $106,620,829
Net Unrealized Appreciation................................. 2,840,451
Accumulated Undistributed Net Investment Income............. 202,213
Accumulated Net Realized Gain............................... 2,121
------------
NET ASSETS.................................................. $109,665,614
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $79,420,062 and 7,438,655 shares of
beneficial interest issued and outstanding)............. $ 10.68
Maximum sales charge (4.75%* of offering price)......... .53
------------
Maximum offering price to public........................ $ 11.21
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $14,630,634 and 1,352,722 shares of
beneficial interest issued and outstanding)............. $ 10.82
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $14,714,274 and 1,379,878 shares of
beneficial interest issued and outstanding)............. $ 10.66
============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $900,644 and 84,391 shares of beneficial
interest issued and outstanding)........................ $ 10.67
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
22 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended September 30, 2006
<Table>
INVESTMENT INCOME:
Interest.................................................... $5,093,462
----------
EXPENSES:
Investment Advisory Fee..................................... 572,894
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $206,751, $5,445 and $158,967
respectively)............................................. 371,163
Accounting.................................................. 71,740
Shareholder Services........................................ 62,107
Trustees' Fees and Related Expenses......................... 37,647
Legal....................................................... 36,663
Custody..................................................... 18,602
Other....................................................... 163,015
----------
Total Expenses.......................................... 1,333,831
Investment Advisory Fee Reduction....................... 114,579
Less Credits Earned on Cash Balances.................... 3,624
----------
Net Expenses............................................ 1,215,628
----------
NET INVESTMENT INCOME....................................... $3,877,834
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 4,857
Futures................................................... 223,920
----------
Net Realized Gain........................................... 228,777
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,795,009
----------
End of the Period:
Investments............................................. 2,884,561
Futures................................................. (44,110)
----------
2,840,451
----------
Net Unrealized Appreciation During the Period............... 45,442
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 274,219
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $4,152,053
==========
</Table>
See Notes to Financial Statements 23
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
----------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 3,877,834 $ 3,992,236
Net Realized Gain.................................. 228,777 411,603
Net Unrealized Appreciation/Depreciation During the
Period........................................... 45,442 (541,868)
------------ ------------
Change in Net Assets from Operations............... 4,152,053 3,861,971
------------ ------------
Distributions from Net Investment Income:
Class A Shares................................... (2,855,993) (2,950,100)
Class B Shares................................... (553,231) (500,423)
Class C Shares................................... (430,486) (447,551)
Class I Shares................................... (22,966) (2,786)
------------ ------------
(3,862,676) (3,900,860)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares................................... (390,380) (111,173)
Class B Shares................................... (76,687) (25,082)
Class C Shares................................... (80,238) (21,027)
Class I Shares................................... (2,627) -0-
------------ ------------
(549,932) (157,282)
------------ ------------
Total Distributions................................ (4,412,608) (4,058,142)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... (260,555) (196,171)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......................... 23,378,784 35,234,147
Net Asset Value of Shares Issued Through Dividend
Reinvestment..................................... 3,272,076 2,853,082
Cost of Shares Repurchased......................... (38,938,362) (30,577,511)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... (12,287,502) 7,509,718
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS.............. (12,548,057) 7,313,547
NET ASSETS:
Beginning of the Period............................ 122,213,671 114,900,124
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $202,213
and $192,750, respectively)...................... $109,665,614 $122,213,671
============ ============
</Table>
24 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS A SHARES ----------------------------------------------
2006 2005 2004 2003 2002
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $10.69 $10.72 $10.76 $10.86 $10.42
------ ------ ------ ------ ------
Net Investment Income...................... .37(a) .36 .37 .38 .42
Net Realized and Unrealized Gain/Loss...... .04 (.01) .04 (.03) .44
------ ------ ------ ------ ------
Total from Investment Operations............. .41 .35 .41 .35 .86
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .37 .37 .37 .40 .42
Distributions from Net Realized Gain....... .05 .01 .08 .05 -0-
------ ------ ------ ------ ------
Total Distributions.......................... .42 .38 .45 .45 .42
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $10.68 $10.69 $10.72 $10.76 $10.86
====== ====== ====== ====== ======
Total Return* (b)............................ 3.91% 3.31% 3.84% 3.33% 8.48%
Net Assets at End of the Period (In
millions).................................. $ 79.4 $ 88.2 $ 76.5 $ 70.1 $ 53.5
Ratio of Expenses to Average Net Assets*..... .99% .99% .93% .84% .85%
Ratio of Net Investment Income to Average Net
Assets*.................................... 3.46% 3.32% 3.50% 3.55% 4.08%
Portfolio Turnover........................... 21% 34% 60% 35% 75%
* 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... 1.09% 1.09% 1.03% 1.04% 1.14%
Ratio of Net Investment Income to Average
Net Assets.............................. 3.36% 3.22% 3.40% 3.35% 3.79%
</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 or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months 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 25
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS B SHARES ------------------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $10.82 $10.75 $10.78 $10.84 $10.41
------ ------ ------ ------ ------
Net Investment Income................... .39(a) .40 .30 .32 .35
Net Realized and Unrealized Gain/Loss... .04 (.03) .04 (.01) .42
------ ------ ------ ------ ------
Total from Investment Operations.......... .43 .37 .34 .31 .77
------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income................................ .38 .29 .29 .32 .34
Distributions from Net Realized Gain.... .05 .01 .08 .05 -0-
------ ------ ------ ------ ------
Total Distributions....................... .43 .30 .37 .37 .34
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........ $10.82 $10.82 $10.75 $10.78 $10.84
====== ====== ====== ====== ======
Total Return* (b)......................... 4.13%(d) 3.47%(d) 3.15%(d) 2.96%(c) 7.61%
Net Assets at End of the Period (In
millions)............................... $ 14.6 $ 16.9 $ 20.3 $ 23.9 $ 17.1
Ratio of Expenses to Average Net
Assets*................................. .78%(d) .82%(d) 1.67%(d) 1.59% 1.60%
Ratio of Net Investment Income to Average
Net Assets*............................. 3.67%(d) 3.51%(d) 2.76%(d) 3.08%(c) 3.34%
Portfolio Turnover........................ 21% 34% 60% 35% 75%
* 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............................... .88%(d) .92%(d) 1.77%(d) 1.79% 1.89%
Ratio of Net Investment Income to
Average Net Assets................... 3.57%(d) 3.41%(d) 2.66%(d) 2.88%(c) 3.05%
</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 the first and second year of purchase and declining to 0% after
the fifth 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) 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 7).
26 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS C SHARES ------------------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $10.68 $10.70 $10.73 $10.82 $10.40
------ ------ ------ ------ ------
Net Investment Income................... .29(a) .29 .30 .30 .34
Net Realized and Unrealized Gain/Loss... .03 (.01) .04 (.02) .42
------ ------ ------ ------ ------
Total from Investment Operations.......... .32 .28 .34 .28 .76
------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income................................ .29 .29 .29 .32 .34
Distributions from Net Realized Gain.... .05 .01 .08 .05 -0-
------ ------ ------ ------ ------
Total Distributions....................... .34 .30 .37 .37 .34
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........ $10.66 $10.68 $10.70 $10.73 $10.82
====== ====== ====== ====== ======
Total Return* (b)......................... 3.04% 2.64%(d) 3.17%(d) 2.69%(c) 7.52%
Net Assets at End of the Period (In
millions)............................... $ 14.7 $ 16.5 $ 18.1 $ 21.4 $ 13.2
Ratio of Expenses to Average Net
Assets*................................. 1.74% 1.64%(d) 1.66%(d) 1.59% 1.60%
Ratio of Net Investment Income to Average
Net Assets *............................ 2.71% 2.69%(d) 2.77%(d) 2.84%(c) 3.33%
Portfolio Turnover........................ 21% 34% 60% 35% 75%
* 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............................... 1.84% 1.74%(d) 1.76%(d) 1.79% 1.89%
Ratio of Net Investment Income to
Average Net Assets................... 2.61% 2.59%(d) 2.67%(d) 2.64%(c) 3.04%
</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) 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 7).
See Notes to Financial Statements 27
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
AUGUST 12, 2005
YEAR ENDED (COMMENCEMENT
CLASS I SHARES SEPTEMBER 30, OF OPERATIONS)
2006 TO SEPTEMBER 30, 2005
--------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............... $10.69 $10.70
------ ------
Net Investment Income................................ .39(a) .05
Net Realized and Unrealized Gain/Loss................ .03 (.01)
------ ------
Total from Investment Operations....................... .42 .04
------ ------
Less:
Distributions from Net Investment Income............. .39 .05
Distributions from Net Realized Gain................. .05 -0-
------ ------
Total Distributions.................................... .44 .05
------ ------
NET ASSET VALUE, END OF THE PERIOD..................... $10.67 $10.69
====== ======
Total Return* (b)...................................... 4.08% 0.38%**
Net Assets at End of the Period (In millions).......... $ .9 $ .6
Ratio of Expenses to Average Net Assets................ .72% .77%
Ratio of Net Investment Income to Average Net Assets... 3.73% 3.59%
Portfolio Turnover..................................... 21% 34%
* 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............. .82% .87%
Ratio of Net Investment Income to Average Net
Assets............................................ 3.63% 3.49%
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
28 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006
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, 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. The Fund offers Class A
Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares
differs by its initial sales load, contingent deferred sales charges, the
allocation of class specific expenses and voting rights on matters affecting a
single class.
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 September 30, 2006, the Fund has $1,536,514 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.
29
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 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, if any, to
its shareholders. Therefore, no provision for federal income taxes is required.
At September 30, 2006, the cost and related gross unrealized appreciation
and depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $106,867,796
============
Gross tax unrealized appreciation........................... $ 2,911,616
Gross tax unrealized depreciation........................... (11,141)
------------
Net tax unrealized appreciation on investments.............. $ 2,900,475
============
</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 at least annually. Distributions from net realized gains for book
purposes may include short term capital gains and gains on futures transactions.
All short-term capital gains and a portion of futures gains are included in
ordinary income for tax purposes.
The tax character of distributions paid during the years ended September 30,
2006 and 2005 was as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $ 467,011 $ 157,902
Tax-exempt income......................................... 3,880,983 3,880,918
Long-term capital gain.................................... 84,585 --
---------- ----------
$4,432,579 $4,038,820
========== ==========
</Table>
Due to inherent differences in the recognition of income, expenses, and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting for the 2006 fiscal year have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. Permanent book and tax
differences of $4,607 related to the Fund's investments in other regulated
investment companies have been reclassified from accumulated undistributed net
investment income to accumulated net realized gain. Additionally, a permanent
difference of $1,088 related to book to tax amortization difference was
reclassified from accumulated undistributed net investment income to accumulated
net realized gain.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed tax-exempt income............................. $459,602
</Table>
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of post October losses which are not realized for
tax purposes until the first day of the following fiscal year and gains or
losses recognized for tax purposes on open futures transactions at September 30,
2006.
30
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
F. EXPENSE REDUCTIONS During the year ended September 30, 2006, the Fund's
custody fee was reduced by $3,624 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 year ended September 30, 2006, the Adviser waived $114,579 of its
investment advisory fee. This represents .10% of the Fund's average net assets
for the period. This waiver is voluntary in nature and can be discontinued at
the Adviser's discretion.
For the year ended September 30, 2006, the Fund recognized expenses of
approximately $3,300 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.
Under separate Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the year ended September 30,
2006, the Fund recognized expenses of approximately $61,900 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Legal" expenses on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses 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 year ended
September 30, 2006, the Fund recognized expenses of approximately $53,200
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 $124,000
are included in "Other" assets on the Statement of Assets and Liabilities at
September 30, 2006. 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
31
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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.
For the year ended September 30, 2006, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $34,800 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $29,300. Sales charges do not represent expenses of the
Fund.
3. CAPITAL TRANSACTIONS
For the years ended September 30, 2006 and 2005, transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A........................... 1,797,066 $ 19,041,928 2,799,376 $ 30,055,073
Class B........................... 122,999 1,315,764 164,518 1,783,449
Class C........................... 243,523 2,575,766 261,414 2,801,679
Class I........................... 42,334 445,326 55,508 593,946
---------- ------------ ---------- ------------
Total Sales......................... 2,205,922 $ 23,378,784 3,280,816 $ 35,234,147
========== ============ ========== ============
Dividend Reinvestment:
Class A........................... 242,302 $ 2,565,280 209,871 $ 2,252,182
Class B........................... 35,247 377,806 29,127 315,068
Class C........................... 28,688 303,396 26,416 283,046
Class I........................... 2,418 25,594 260 2,786
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 308,655 $ 3,272,076 265,674 $ 2,853,082
========== ============ ========== ============
Repurchases:
Class A........................... (2,853,781) $(30,222,471) (1,888,033) $(20,267,308)
Class B........................... (367,467) (3,939,234) (524,704) (5,674,515)
Class C........................... (436,595) (4,611,782) (432,719) (4,629,779)
Class I........................... (15,578) (164,875) (551) (5,909)
---------- ------------ ---------- ------------
Total Repurchases................... (3,673,421) $(38,938,362) (2,846,007) $(30,577,511)
========== ============ ========== ============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the year ended September 30,
2006, the fund received redemption fees of $14, which are reported as part of
"Cost of Shares Repurchased" on the Statement of Changes in Net Assets. The per
share impact from redemption fees paid to the Fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $23,204,650 and $36,254,665 respectively.
32
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
6. 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 may use derivative instruments for a variety of reasons, 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 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. Risks may arise as a result of the potential inability of the
counterparties 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 on U.S. Treasury Securities and
typically closes the contract prior to delivery date. Upon entering into futures
contracts, the Fund maintains an amount of cash or liquid securities with a
value equal to a percentage of the contract amount with either a futures
commission merchant pursuant to rules and regulations promulgated under the 1940
Act, as amended, or with its custodian in an account in the broker's name. This
amount is known as initial margin. During the period the futures contract is
open, payments are received from or made to the broker based upon changes in the
value of the contract (the variation margin). 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 year ended September 30, 2006,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2005........................... 161
Futures Opened.............................................. 398
Futures Closed.............................................. (514)
----
Outstanding at September 30, 2006........................... 45
====
</Table>
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees 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. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $0 and $2,500 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, the distribution fee is reduced.
33
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action 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 Van Kampen 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
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal, which is located at the back of this Report.
9. 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.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The impact to the
Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
34
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen Intermediate Term
Municipal Income Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Intermediate Term Municipal Income Fund (the "Fund"), including the
portfolio of investments, as of September 30, 2006, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen Intermediate Term Municipal Income Fund at September 30, 2006, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
November 14, 2006
35
VAN KAMPEN INTERMEDIATE TERM 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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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
One Lincoln Street
Boston, Massachusetts 02111
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
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
September 30, 2006. The Fund designated 99.9% of the income distributions as a
tax-exempt income distribution. The Fund designated and paid $84,585 as a
long-term capital gain distribution. In January, the Fund provides tax
information to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
36
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
37
<Table>
<Caption>
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
38
<Table>
<Caption>
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1993 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
39
<Table>
<Caption>
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1993 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing
(64) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
40
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 1993 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
41
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
</Table>
42
<Table>
<Caption>
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 2003 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
</Table>
43
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen -- as well as several other
decisions by other judges in the Southern District of New York and certain other
courts that have dismissed similar complaints against other investment funds --
plaintiff in the derivative action has determined that the suit would be
unsuccessful, if pursued further. Accordingly, plaintiff has asked Judge Owen to
dismiss the action. No attorneys' fees will be paid by defendants and no
consideration will be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than December 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen Intermediate Term Municipal Income Fund
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.
(continued on next page)
Van Kampen Intermediate Term Municipal Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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, 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
(continued on back)
Van Kampen Intermediate Term Municipal Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
138, 338, 538
INF ANR 11/06
(VAN KAMPEN INVESTMENTS LOGO) RN06-03168P-Y09/06
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen New
York Tax Free Income Fund performed during the 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 September 30, 2006.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUSES CONTAIN
INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS,
CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL PROSPECTUS, CONTACT YOUR
FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. 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 9/30/06
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Municipal Bond Index and the Lehman Brothers New York Municipal Bond Index from
9/30/96 through 9/30/06. Class A shares, adjusted for sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN NEW YORK TAX LEHMAN BROTHERS NEW YORK LEHMAN BROTHERS MUNICIPAL
FREE INCOME FUND MUNICIPAL BOND INDEX BOND INDEX
----------------------- ------------------------ -------------------------
9/96 9522.00 10000.00 10000.00
9656.00 10112.00 10113.00
9848.00 10302.00 10298.00
9806.00 10258.00 10255.00
9811.00 10276.00 10274.00
9920.00 10373.00 10369.00
9825.00 10239.00 10230.00
9896.00 10336.00 10316.00
10047.00 10512.00 10471.00
10172.00 10628.00 10583.00
10525.00 10938.00 10876.00
10395.00 10831.00 10774.00
9/97 10528.00 10960.00 10902.00
10607.00 11034.00 10972.00
10666.00 11099.00 11037.00
10878.00 11267.00 11197.00
11006.00 11386.00 11313.00
11032.00 11394.00 11316.00
11048.00 11417.00 11326.00
10976.00 11345.00 11275.00
11198.00 11551.00 11454.00
11253.00 11604.00 11499.00
11278.00 11628.00 11528.00
11504.00 11814.00 11706.00
9/98 11652.00 11960.00 11852.00
11613.00 11969.00 11851.00
11640.00 12009.00 11893.00
11693.00 12042.00 11923.00
11822.00 12191.00 12065.00
11768.00 12139.00 12012.00
11788.00 12151.00 12029.00
11837.00 12184.00 12059.00
11753.00 12114.00 11989.00
11556.00 11936.00 11816.00
11576.00 11977.00 11859.00
11415.00 11892.00 11764.00
9/99 11348.00 11891.00 11769.00
11136.00 11753.00 11642.00
11266.00 11890.00 11765.00
11121.00 11798.00 11678.00
11022.00 11746.00 11627.00
11162.00 11894.00 11762.00
11426.00 12156.00 12019.00
11357.00 12078.00 11948.00
11264.00 12020.00 11886.00
11579.00 12345.00 12201.00
11785.00 12506.00 12371.00
11992.00 12693.00 12561.00
9/00 11905.00 12633.00 12496.00
12034.00 12774.00 12632.00
12123.00 12878.00 12728.00
12494.00 13214.00 13042.00
12583.00 13336.00 13172.00
12617.00 13371.00 13213.00
12759.00 13507.00 13332.00
12599.00 13403.00 13187.00
12750.00 13539.00 13329.00
12877.00 13618.00 13418.00
13080.00 13810.00 13617.00
13350.00 14030.00 13842.00
9/01 13211.00 13922.00 13795.00
13324.00 14079.00 13959.00
13201.00 13974.00 13842.00
13053.00 13854.00 13711.00
13294.00 14101.00 13949.00
13507.00 14284.00 14117.00
13225.00 14023.00 13840.00
13509.00 14288.00 14111.00
13577.00 14351.00 14196.00
13725.00 14501.00 14346.00
13933.00 14682.00 14531.00
14134.00 14868.00 14705.00
9/02 14484.00 15189.00 15028.00
14185.00 14953.00 14778.00
14123.00 14871.00 14717.00
14433.00 15193.00 15028.00
14335.00 15160.00 14990.00
14576.00 15364.00 15199.00
14582.00 15380.00 15208.00
14731.00 15477.00 15309.00
15098.00 15826.00 15667.00
14982.00 15763.00 15601.00
14431.00 15230.00 15055.00
14623.00 15353.00 15167.00
9/03 15018.00 15795.00 15613.00
14983.00 15722.00 15534.00
15178.00 15883.00 15696.00
15299.00 15998.00 15826.00
15310.00 16088.00 15917.00
15628.00 16322.00 16156.00
15471.00 16260.00 16100.00
15137.00 15892.00 15719.00
15120.00 15833.00 15662.00
15179.00 15882.00 15719.00
15397.00 16092.00 15926.00
15702.00 16404.00 16245.00
9/04 15789.00 16493.00 16331.00
15905.00 16632.00 16472.00
15716.00 16493.00 16336.00
15948.00 16683.00 16535.00
16122.00 16829.00 16690.00
16057.00 16782.00 16634.00
15894.00 16673.00 16529.00
16177.00 16921.00 16790.00
16325.00 17037.00 16909.00
16456.00 17140.00 17013.00
16400.00 17059.00 16937.00
16571.00 17226.00 17108.00
9/05 16466.00 17110.00 16992.00
16371.00 17014.00 16889.00
16394.00 17085.00 16970.00
16568.00 17235.00 17116.00
16632.00 17278.00 17162.00
16809.00 17403.00 17278.00
16690.00 17286.00 17158.00
16663.00 17280.00 17153.00
16749.00 17356.00 17229.00
16701.00 17288.00 17164.00
16895.00 17492.00 17368.00
17151.00 17738.00 17626.00
9/06 17283.00 17859.00 17749.00
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 7/29/94 since 7/29/94 since 7/29/94
- ------------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
W/O 4.75% W/O 4.00% W/O 1.00%
AVERAGE ANNUAL SALES SALES SALES SALES SALES SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 6.33% 5.91% 5.81% 5.81% 5.69% 5.69%
10-year 6.14 5.62 5.51 5.51 5.36 5.36
5-year 5.52 4.49 4.72 4.47 4.72 4.72
1-year 4.96 -0.02 4.18 0.23 4.14 3.15
- ------------------------------------------------------------------------------------------------------
30-Day SEC Subsidized Yield 3.45% 2.87% 2.87%
- ------------------------------------------------------------------------------------------------------
30-Day SEC Yield 3.21% 2.62% 2.62%
</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 eight 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. 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 unsubsidized 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 Lehman Brothers NY Municipal Bond Index
tracks the performance of NY issued municipal bonds rated at least Baa or BBB by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively
and with maturities of 2 years or greater. Indexes do not include any expenses,
fees or sales charges, which would lower performance. Indexes are 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 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
MARKET CONDITIONS
Against the backdrop of strong economic growth, good employment data and
inflationary pressures stemming from rising oil prices, the Federal Open Market
Committee (the "Fed") continued its tightening campaign during the first nine
months of the reporting period, raising the federal funds target rate six times
to 5.25 percent at the end of June. As the months progressed however, economic
growth moderated as consumer spending and housing weakened while inflation
concerns eased, prompting investors to speculate that the Fed would take a break
from rate increases. In August the Fed did pause, ending a two-year run of 17
consecutive rate increases--the longest stretch of increases in 25 years. At its
September meeting, the Fed again kept its target rate unchanged, and indicated
that any future rate increases would be driven by the weight of economic data.
As a result of the improved outlook for the fixed income market, yields on
longer-maturity municipal bonds fell dramatically in latter months of the
reporting year, ultimately ending at the lowest level in decades. Yields on
shorter-maturity municipal bonds, however, moved higher. Accordingly, the slope
of the municipal yield curve flattened as the spread between short-term and
long-term interest rates narrowed.
Demand for municipal bonds continued to be strong during the period. In fact,
inflows into municipal bond funds were 45 percent higher year-to-date through
September than for the same period last year, much of which went into high yield
funds. Because prevailing interest rates were still at relatively low levels,
investors increasingly sought out lower-quality, higher yielding bonds. The
increased demand for high yield bonds led this segment of the market to
considerably outperform high-grade issues. In addition, long-term bonds
continued to earn the best returns, while the short end of the curve posted the
lowest returns as Fed rate increases moved yields in this portion of the curve
higher.
Although municipal bond issuance remained brisk in the last quarter of 2005,
volume declined throughout the remaining months of the period. As of the end of
September, national municipal bond issuance was down 14 percent for 2006. The
reduced supply, coupled with growing demand, further fueled municipal bond
performance.
Consistent with the national trend, municipal bond issuance by the State of New
York declined for the overall period. However, there was still an abundance of
new issue supply as New York continues to be one of the largest issuers of
municipal bonds in the country. The state's economy is largely driven by the
2
financial world, which has enjoyed a healthy run over the past decade. As such,
the state continues to have a positive credit outlook.
PERFORMANCE ANALYSIS
The fund returned 4.96 percent for the 12 months ended September 30, 2006 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmarks,
the Lehman Brothers Municipal Bond Index returned 4.45 percent and the Lehman
Brothers NY Municipal Bond Index returned 4.38 percent for the period.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2006
<Table>
<Caption>
- ---------------------------------------------------------------------------
LEHMAN BROTHERS LEHMAN BROTHERS
MUNICIPAL NY MUNICIPAL
CLASS A CLASS B CLASS C BOND INDEX BOND INDEX
4.96% 4.18% 4.14% 4.45% 4.38%
- ---------------------------------------------------------------------------
</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.
Throughout the reporting period, we sought opportunities to enhance the
portfolio's yield, while still adhering to our quality-driven investment
discipline. We added to the fund's holdings of lower and non-rated issues that
offered favorable characteristics. As a result, the fund was overweighted
relative to the Lehman Brothers New York Municipal Bond Index benchmark in the
non-rated sector, and underweighted in higher-quality bonds. This posture proved
advantageous as lower and non-rated bonds outperformed higher-rated bonds during
the reporting period.
Another strategy that allowed us to capture significant yield was to increase
the fund's holdings of tobacco revenue bonds. Prior to August of 2005, the fund
did not contain any tobacco bonds but we began cautiously purchasing the bonds
as refundings came into the market in New York. The litigation environment has
become quite favorable for tobacco companies, demand for the bonds remains
strong, and the industry continues to prosper. Our decision to increase the
fund's exposure to this sector during the period was especially additive to
performance as valuations have dramatically improved.
The fund also benefited from its yield-curve positioning. We continued to
emphasize the long end of the curve, favoring bonds with maturities of 20 to 40
years. This strategy served the fund well as longer-dated issues outperformed
shorter-maturity bonds. In addition, reflecting our view that interest rates in
the Treasury market would continue to rise, we kept the fund's duration (a
measure of interest-rate sensitivity) slightly shorter than that of the Lehman
Brothers New York Municipal Bond Index. This conservative stance, which we
3
implemented by hedging with five- and 10-year Treasury futures, was beneficial
as rates in the taxable market rose throughout the period.
We added to the fund's holdings in the housing and health care sectors, but the
portfolio remained well diversified across the major sectors of the municipal
bond market. As of September 30, 2006, the fund's largest allocations were to
the general purpose, hospital and higher education sectors. The portfolio was
underweight relative to the Lehman Brothers New York Municipal Bond Index in the
transportation sector, which detracted from returns in the last few months of
the period when the sector rallied.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
4
<Table>
<Caption>
RATINGS ALLOCATIONS AS OF 9/30/06
AAA/Aaa 34.3%
AA/Aa 32.4
A/A 10.3
BBB/Baa 16.4
BB/Ba 2.2
B/B 0.5
NR 3.9
<Caption>
TOP FIVE SECTORS AS OF 9/30/06
General Purpose 17.9%
Hospital 14.1
Higher Education 8.9
Tobacco-Master Settlement 8.6
Student Housing 7.9
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. Sectors are as a percentage of long-term
investments. Ratings 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.
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. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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 (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 (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 (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 POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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 charges on redemptions of Class B and Class C
Shares; and redemption fees; 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 04/01/06 - 09/30/06.
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
account values and 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 or redemption fees.
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*
------------------------------------------------
04/01/06 09/30/06 4/1/06-9/30/06
Class A
Actual...................................... $1,000.00 $1,035.53 $3.78
Hypothetical................................ 1,000.00 1,021.37 3.75
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,031.74 7.59
Hypothetical................................ 1,000.00 1,017.57 7.54
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,031.97 7.34
Hypothetical................................ 1,000.00 1,017.87 7.28
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.74%, 1.49%,
and 1.44% for Class A, B and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 183/365 (to reflect the
one-half year period). These ratios reflect an expense waiver.
Assumes all dividends and distributions were reinvested.
8
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
9
together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees
10
discuss with the investment adviser its revenues and expenses, including among
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
11
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
MUNICIPAL BONDS 99.5%
NEW YORK 98.6%
$1,290 Albany Cnty, NY Indl Dev Agy Indl Dev Rev
Albany College of Pharmacy Ser A.......... 5.625% 12/01/34 $ 1,356,693
330 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van
Allen Proj Ser A.......................... 6.875 06/01/39 338,814
500 East Rochester, NY Hsg Auth Rev Sr Living
Woodland Vlg Proj Rfdg.................... 5.500 08/01/33 509,335
1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev
City of Buffalo Proj (FSA Insd)........... 5.750 05/01/21 1,380,587
1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev
City of Buffalo Proj (FSA Insd)........... 5.750 05/01/22 1,376,937
1,000 Erie Cnty, NY Tob Asset Sec Corp Ser A.... 5.000 06/01/45 1,009,390
1,530 Hempstead Town, NY Indl Dev Adelphi Univ
Civic Fac................................. 5.000 10/01/35 1,592,455
1,250 Hempstead Town, NY Indl Dev Adelphi Univ
Civic Fac................................. 5.750 06/01/22 1,368,912
1,290 Islip, NY Res Recovery Agy Res 1985 Fac
Ser E (AMT) (FSA Insd).................... 5.750 07/01/22 1,431,345
1,000 Livingston Cnty, NY Indl Dev Agy Civic Fac
Rev Nicholas H Noyes Mem Hosp............. 6.000 07/01/30 1,036,880
1,500 Long Island Pwr Auth NY Elec Sys Rev Gen
Ser B..................................... 5.000 12/01/35 1,565,985
2,000 Long Island Pwr Auth NY Elec Sys Rev Gen
Ser C..................................... 5.500 09/01/19 2,174,720
1,000 Metropolitan Trans Auth NY Rev Ser A Rfdg
(AMBAC Insd).............................. 5.500 11/15/19 1,099,850
1,000 Metropolitan Trans Auth NY Svc Contract
Ser A Rfdg................................ 5.125 01/01/29 1,055,160
1,500 Metropolitan Trans Auth NY Rev Ser A
Rfdg...................................... 5.000 11/15/23 1,602,570
1,000 Monroe Cnty, NY Indl Dev Agy Nazareth
College Rochester Proj (MBIA Insd)........ 5.250 10/01/21 1,078,320
1,320 Montgomery Cnty, NY Indl Dev Agy Lease HFM
Boces Ser A (XLCA Insd)................... 5.000 07/01/34 1,378,529
2,425 New York City Fiscal 2003 Ser I........... 5.750 03/01/15 2,687,773
1,500 New York City Hlth & Hosp Corp Rev Hlth
Sys Ser A (FSA Insd)...................... 5.500 02/15/18 1,633,185
1,000 New York City Hlth & Hosp Corp Rev Hlth
Sys Ser A (FSA Insd)...................... 5.500 02/15/19 1,088,790
1,000 New York City Hsg Dev Corp Multi-Family
Rev Hsg Ser J1............................ 4.850 05/01/36 1,017,620
2,500 New York City Hsg Dev Corp Multi-Family
Rev Hsg Ser L (AMT)....................... 5.050 11/01/39 2,555,100
1,000 New York City Hsg Dev Corp Ser A (AMT).... 5.500 11/01/34 1,037,140
455 New York City Indl Dev Agy Civic Fac Rev
Cmnty Res Developmentally Disabled........ 7.500 08/01/26 464,833
</Table>
12 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 500 New York City Indl Dev Agy Civic Fac Rev
College of New Rochelle Proj.............. 5.750% 09/01/17 $ 517,490
500 New York City Indl Dev Agy Civic Fac Rev
YMCA Greater NY Proj...................... 6.000 08/01/07 509,515
1,405 New York City Indl Dev Agy Fac Rev Royal
Charter-NY Presbyterian (FSA Insd)........ 5.375 12/15/16 1,544,376
500 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A..................... 6.250 03/01/15 532,060
500 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A..................... 6.500 03/01/35 533,940
1,125 New York City Indl Dev Agy Rev Liberty
Iac/Interactivecorp....................... 5.000 09/01/35 1,145,632
500 New York City Indl Dev Agy Spl Fac Rev
Amern Airl JFK Intl Arpt (AMT)............ 7.750 08/01/31 590,210
500 New York City Indl Dev Agy Spl Fac Rols RR
II (Inverse Floating Rate) (AMT) (Acquired
12/09/05, Cost $1,114,880) (b)............ 6.961 01/01/19 673,580
500 New York City Muni Wtr Fin Ser B (c)...... 6.000 06/15/33 544,865
2,500 New York City Ser A....................... 5.500 08/01/20 2,734,025
2,500 New York City Ser G....................... 5.000 08/01/24 2,648,100
2,390 New York City Ser G....................... 5.000 12/01/28 2,506,632
1,500 New York City Ser J....................... 5.000 03/01/24 1,581,615
1,000 New York City Transitional Cultural Res
Rev Amern Museum Nat History Ser A (MBIA
Insd)..................................... 5.000 07/01/44 1,042,470
1,000 New York City Transitional Fin Auth Rev
Future Tax Secd Ser A Rfdg (d)............ 5.500/14.000 11/01/26 1,083,530
1,500 New York City Transitional Fin Auth Rev
Future Tax Secd Ser C (AMBAC Insd)........ 5.250 08/01/21 1,619,790
1,540 New York City Transitional Future Tax Secd
Ser B..................................... 5.500 02/01/15 1,663,878
2,475 New York Cnty Tob Tr IV Settlement Pass
Thru Ser A................................ 5.000 06/01/45 2,498,240
750 New York Liberty Dev Corp. Rev National
Sports Museum Proj Ser A (Acquired
08/07/06, Cost $750,000) (b).............. 6.125 02/15/19 777,255
1,400 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser B............................. 5.000 06/15/36 1,466,612
1,500 New York St Dorm Auth Lease Rev Muni Hlth
Fac Impt Pgm Ser 1 (FSA Insd)............. 5.500 01/15/14 1,616,850
2,000 New York St Dorm Auth Rev Catholic Hlth
L.I. Oblig Grp............................ 5.000 07/01/27 2,062,080
1,000 New York St Dorm Auth Rev City Univ Cons
Third Ser 1 (FGIC Insd)................... 5.250 07/01/25 1,047,260
1,230 New York St Dorm Auth Rev City Univ Ser D
Rfdg (FSA Insd)........................... 5.750 07/01/12 1,331,721
</Table>
See Notes to Financial Statements 13
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 650 New York St Dorm Auth Rev City Univ Sys
Cons Ser A................................ 5.625% 07/01/16 $ 729,281
1,000 New York St Dorm Auth Rev City Univ Sys
Cons Ser B................................ 6.000 07/01/14 1,105,130
1,890 New York St Dorm Auth Rev Dept Ed (e)..... 5.250 07/01/21 2,044,111
2,000 New York St Dorm Auth Rev FHA Montefiore
Hosp (FGIC Insd).......................... 5.000 08/01/33 2,097,840
1,000 New York St Dorm Auth Rev Insd Brooklyn
Law Sch Ser B (XLCA Insd)................. 5.375 07/01/23 1,091,140
1,055 New York St Dorm Auth Rev Insd NY St Rehab
Assn Ser A (AMBAC Insd) (e)............... 5.500 07/01/13 1,158,664
1,040 New York St Dorm Auth Rev Insd NY St Rehab
Assn Ser A (AMBAC Insd) (e)............... 5.500 07/01/15 1,137,874
415 New York St Dorm Auth Rev Mental Hlth Svc
Ser B (MBIA Insd)......................... 5.250 08/15/31 438,514
1,200 New York St Dorm Auth Rev Miriam Osborn
Mem Home Ser B (ACA Insd)................. 6.375 07/01/29 1,305,432
2,000 New York St Dorm Auth Rev Non St Supported
Debt Mt Sinai NYU Hlth Ser C.............. 5.500 07/01/26 2,032,400
2,000 New York St Dorm Auth Rev Non St Supported
Debt Providence Rest (ACA Insd)........... 5.250 07/01/25 2,120,040
750 New York St Dorm Auth Rev Nursing Home
Menorah Campus (FHA Gtd).................. 5.950 02/01/17 770,655
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser D (MBIA Insd)......................... 5.500 10/01/17 1,098,110
1,000 New York St Dorm Auth Rev Secd Hosp North
Gen Hosp Rfdg............................. 5.750 02/15/18 1,106,730
1,000 New York St Dorm Auth Rev St Univ Ed Fac
1989 Res (MBIA Insd)...................... 6.000 05/15/15 1,090,390
1,500 New York St Dorm Auth Rev Non St Supported
Debt NYU Hosp Ctr Ser A (a)............... 5.000 07/01/20 1,541,280
500 New York St Energy Resh & Dev Auth Gas Fac
Rev Brooklyn Union Gas Ser B (Inverse
Floating Rate) (AMT)...................... 9.919 07/01/26 531,400
2,200 New York St Environ Fac Corp St Clean Wtr
& Drinking NYC Muni Wtr Fin Auth Sub Ser
B......................................... 5.000 06/15/26 2,348,984
1,000 New York St Environ Fac Corp St Clean Wtr
& Drinking Revolving Fd Pooled Fin Pgm Ser
I......................................... 5.250 09/15/19 1,083,610
2,280 New York St Loc Govt Assist Corp Ser E
Rfdg...................................... 6.000 04/01/14 2,620,130
1,990 New York St Mtg Agy Rev for Homeowner Mtg
Ser 130 (AMT)............................. 4.800 10/01/37 2,005,622
695 New York St Mtg Agy Rev Ser 82 (AMT)...... 5.650 04/01/30 700,908
995 New York St Mtg Agy Rev Ser 101 (AMT)..... 5.400 04/01/32 1,027,576
500 New York St Urban Dev Corp Rev
Correctional Fac Ser A Rfdg............... 5.500 01/01/14 542,240
</Table>
14 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 220 Oneida Cnty, NY Indl Dev Agy Civic Fac
Saint Elizabeth Med Ser A................. 5.875% 12/01/29 $ 224,503
100 Port Auth NY & NJ Spl Oblig (AMT)......... 7.000 10/01/07 101,484
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 1,055,370
2,500 Rensselaer Cnty, NY Sch Dist Ctfs Partn
(XLCA Insd)............................... 5.000 06/01/26 2,668,775
1,000 Rockland Cnty, NY Solid Waste Ser B (AMT)
(AMBAC Insd).............................. 5.000 12/15/23 1,048,630
825 Suffolk Cnty, NY Indl Dev Agy Civic Fac
Rev Family Svc League Suffolk Cnty (LOC:
Fleet National)........................... 5.000 11/01/34 858,751
40 Syracuse, NY Hsg Auth Rev Sub Proj Loretto
Rest Ser B................................ 7.500 08/01/10 40,522
250 Syracuse, NY Indl Dev Agy Rev First Mtg
Jewish Home Ser A......................... 7.375 03/01/21 270,468
2,000 Tobacco Settlement Fin Corp NY Ser C-1.... 5.500 06/01/22 2,164,920
325 Triborough Brdg & Tunl Auth NY Rev Gen
Purp Ser A................................ 5.000 01/01/32 335,348
2,000 Triborough Brdg & Tunl Auth NY Rev Gen
Purp Ser A................................ 5.250 01/01/18 2,145,240
1,590 Tsasc, Inc. NY Ser 1...................... 5.000 06/01/34 1,614,884
2,500 Tsasc, Inc. NY Ser 1...................... 5.125 06/01/42 2,549,500
1,000 Ulster Cnty, NY Res Recovery Agy Solid
Waste Sys Rev Rfdg (AMBAC Insd)........... 5.250 03/01/18 1,075,600
1,000 Upper Mohawk Vly Regl Wtr Fin Auth NY Wtr
Sys Rev (AMBAC Insd)...................... 5.750 04/01/20 1,077,490
310 Utica, NY Indl Dev Agy Civic Fac Rev Utica
College Proj Ser A........................ 5.750 08/01/28 324,818
1,000 Warren & Washington Cnty, NY Indl Dev Agy
Civic Fac Rev Glens Falls Hosp Proj Ser A
(FSA Insd)................................ 5.000 12/01/35 1,042,440
500 Westchester Cnty, NY Indl Dev Agy Mtg
Kendal on Hudson Proj Ser A............... 6.375 01/01/24 535,385
2,000 Westchester Tob Asset Sec Corp NY......... 5.125 06/01/45 2,036,300
1,000 Yonkers, NY Indl Dev Agy Civic Fac Rev
Cmnty Dev Ppty Yonkers Inc Ser A
(Prerefunded @ 02/01/11).................. 6.625 02/01/26 1,124,300
------------
118,135,438
------------
U. S. VIRGIN ISLANDS 0.9%
1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt
Taxes Ln Nt Ser A......................... 6.375 10/01/19 1,100,900
------------
</Table>
See Notes to Financial Statements 15
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2006 continued
<Table>
<Caption>
DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS 99.5%
(Cost $114,058,331)............................................................ $119,236,338
SHORT-TERM INVESTMENT 0.2%
(Cost $250,000)................................................................ 250,000
------------
TOTAL INVESTMENTS 99.7%
(Cost $114,308,331)............................................................ 119,486,338
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%...................................... 355,203
------------
NET ASSETS 100.0%............................................................... $119,841,541
============
</Table>
Percentages are calculated as a percentage of net assets.
(a) Security purchased on a when-issued or delayed delivery basis.
(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 1.21% of net
assets.
(c) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(d) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(e) The Fund owns 100% of the outstanding bond issuance.
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.
XLCA--XL Capital Assurance Inc.
FUTURES CONTRACTS OUTSTANDING AS OF SEPTEMBER 30, 2006:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures December 2006 (Current
Notional Value of $108,063 per contract).................. 29 $(22,999)
== ========
</Table>
16 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2006
<Table>
ASSETS:
Total Investments (Cost $114,308,331)....................... $119,486,338
Cash........................................................ 279,127
Receivables:
Interest.................................................. 1,632,425
Investments Sold.......................................... 514,820
Fund Shares Sold.......................................... 125,673
Variation Margin on Futures............................... 2,719
Other....................................................... 96,762
------------
Total Assets............................................ 122,137,864
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,546,575
Fund Shares Repurchased................................... 210,924
Income Distributions...................................... 108,479
Swap Contracts............................................ 106,425
Distributor and Affiliates................................ 69,285
Investment Advisory Fee................................... 21,621
Trustees' Deferred Compensation and Retirement Plans........ 153,396
Accrued Expenses............................................ 79,618
------------
Total Liabilities....................................... 2,296,323
------------
NET ASSETS.................................................. $119,841,541
------------
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $114,168,104
Net Unrealized Appreciation................................. 5,155,008
Accumulated Undistributed Net Investment Income............. 388,711
Accumulated Net Realized Gain............................... 129,718
------------
NET ASSETS.................................................. $119,841,541
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $73,838,558 and 4,482,841 shares of
beneficial interest issued and outstanding)............. $ 16.47
Maximum sales charge (4.75%* of offering price)......... .82
------------
Maximum offering price to public........................ $ 17.29
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $28,613,499 and 1,741,477 shares of
beneficial interest issued and outstanding)............. $ 16.43
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $17,389,484 and 1,057,212 shares of
beneficial interest issued and outstanding)............. $ 16.45
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 17
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended September 30, 2006
<Table>
INVESTMENT INCOME:
Interest.................................................... $5,700,537
----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $177,911, $311,406 and $171,191,
respectively)............................................. 660,508
Investment Advisory Fee..................................... 560,661
Shareholder Services........................................ 67,680
Trustees' Fees and Related Expenses......................... 36,472
Legal....................................................... 33,434
Custody..................................................... 17,911
Other....................................................... 157,680
----------
Total Expenses........................................ 1,534,346
Investment Advisory Fee Reduction..................... 298,224
Less Credits Earned on Cash Balances.................. 3,982
----------
Net Expenses.......................................... 1,232,140
----------
NET INVESTMENT INCOME....................................... $4,468,397
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 2,255
Futures................................................... 601,519
Swap Contracts............................................ (123,562)
----------
Net Realized Gain........................................... 480,212
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 4,846,831
----------
End of the Period:
Investments............................................. 5,178,007
Futures................................................. (22,999)
----------
5,155,008
----------
Net Unrealized Appreciation During the Period............... 308,177
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 788,389
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $5,256,786
==========
</Table>
18 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
----------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 4,468,397 $ 4,216,652
Net Realized Gain.................................. 480,212 2,081,074
Net Unrealized Appreciation/Depreciation During the
Period........................................... 308,177 (1,745,917)
------------ ------------
Change in Net Assets from Operations............... 5,256,786 4,551,809
------------ ------------
Distributions from Net Investment Income:
Class A Shares................................... (2,816,473) (2,448,929)
Class B Shares................................... (1,008,247) (1,124,558)
Class C Shares................................... (572,354) (547,665)
------------ ------------
(4,397,074) (4,121,152)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares................................... (1,332,049) -0-
Class B Shares................................... (632,017) -0-
Class C Shares................................... (347,951) -0-
------------ ------------
(2,312,017) -0-
------------ ------------
Total Distributions................................ (6,709,091) (4,121,152)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... (1,452,305) 430,657
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......................... 21,951,233 20,984,248
Net Asset Value of Shares Issued Through Dividend
Reinvestment..................................... 4,826,992 2,899,167
Cost of Shares Repurchased......................... (25,286,714) (22,740,048)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... 1,491,511 1,143,367
------------ ------------
TOTAL INCREASE IN NET ASSETS....................... 39,206 1,574,024
NET ASSETS:
Beginning of the Period............................ 119,802,335 118,228,311
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $388,711
and $319,669, respectively)...................... $119,841,541 $119,802,335
============ ============
</Table>
See Notes to Financial Statements 19
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS A SHARES ------------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $16.67 $16.60 $16.40 $16.49 $15.76
------ ------ ------ ------ ------
Net Investment Income...................... .66(a) .64 .65 .69 .74
Net Realized and Unrealized Gain/Loss...... .11 .06 .17 (.10) .73
------ ------ ------ ------ ------
Total from Investment Operations............. .77 .70 .82 .59 1.47
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .65 .63 .62 .68 .74
Distributions from Net Realized Gain....... .32 -0- -0- -0- -0-
------ ------ ------ ------ ------
Total Distributions.......................... .97 .63 .62 .68 .74
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $16.47 $16.67 $16.60 $16.40 $16.49
====== ====== ====== ====== ======
Total Return* (b)............................ 4.96% 4.29% 5.13% 3.69% 9.63%
Net Assets at End of the Period (In
millions).................................. $ 73.8 $ 67.8 $ 62.2 $ 63.6 $ 47.5
Ratio of Expenses to Average Net Assets*..... .73% .76% .76% .55% .38%
Ratio of Net Investment Income to Average Net
Assets*.................................... 4.05% 3.87% 3.94% 4.19% 4.68%
Portfolio Turnover........................... 30% 41% 15% 27% 43%
* 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% 1.01% 1.09% 1.06% 1.07%
Ratio of Net Investment Income to Average
Net Assets.............................. 3.80% 3.62% 3.60% 3.68% 3.99%
</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 or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months 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 shareholder would pay on Fund distributions or the redemptions
of Fund shares.
20 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS B SHARES ------------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $16.63 $16.58 $16.38 $16.47 $15.74
------ ------ ------ ------ ------
Net Investment Income...................... .54(a) .52 .52 .56 .62
Net Realized and Unrealized Gain/Loss...... .11 .04 .18 (.09) .73
------ ------ ------ ------ ------
Total from Investment Operations............. .65 .56 .70 .47 1.35
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .53 .51 .50 .56 .62
Distributions from Net Realized Gain....... .32 -0- -0- -0- -0-
------ ------ ------ ------ ------
Total Distributions.......................... .85 .51 .50 .56 .62
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $16.43 $16.63 $16.58 $16.38 $16.47
====== ====== ====== ====== ======
Total Return* (b)............................ 4.18% 3.40% 4.36% 2.93% 8.83%
Net Assets at End of the Period (In
millions).................................. $ 28.6 $ 33.9 $ 38.6 $ 40.5 $ 40.5
Ratio of Expenses to Average Net Assets*..... 1.48% 1.51% 1.51% 1.29% 1.13%
Ratio of Net Investment Income to Average Net
Assets*.................................... 3.30% 3.12% 3.19% 3.45% 3.92%
Portfolio Turnover........................... 30% 41% 15% 27% 43%
* 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% 1.76% 1.84% 1.80% 1.82%
Ratio of Net Investment Income to Average
Net Assets.............................. 3.05% 2.87% 2.85% 2.94% 3.24%
</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 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.
See Notes to Financial Statements 21
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
CLASS C SHARES ------------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $16.65 $16.59 $16.39 $16.48 $15.75
------ ------ ------ ------ ------
Net Investment Income...................... .54(a) .52 .52 .56 .62
Net Realized and Unrealized Gain/Loss...... .11 .05 .18 (.09) .73
------ ------ ------ ------ ------
Total from Investment Operations............. .65 .57 .70 .47 1.35
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income... .53 .51 .50 .56 .62
Distributions from Net Realized Gain....... .32 -0- -0- -0- -0-
------ ------ ------ ------ ------
Total Distributions.......................... .85 .51 .50 .56 .62
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $16.45 $16.65 $16.59 $16.39 $16.48
====== ====== ====== ====== ======
Total Return* (b)............................ 4.14%(d) 3.46%(d) 4.36% 2.92%(c) 8.83%
Net Assets at End of the Period (In
millions).................................. $ 17.4 $ 18.1 $ 17.5 $ 17.7 $ 12.0
Ratio of Expenses to Average Net Assets*..... 1.46%(d) 1.47%(d) 1.51% 1.30% 1.13%
Ratio of Net Investment Income to Average Net
Assets*.................................... 3.32%(d) 3.14%(d) 3.19% 3.45%(c) 3.92%
Portfolio Turnover........................... 30% 41% 15% 27% 43%
* 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... 1.71%(d) 1.72%(d) 1.84% 1.81% 1.82%
Ratio of Net Investment Income to Average
Net Assets.............................. 3.10%(d) 2.89%(d) 2.85% 2.94%(c) 3.23%
</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) 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 7).
22 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006
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. The Fund offers Class
A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of
shares differs by its initial sales load, contingent deferred sales charges, the
allocation of class-specific expenses and voting rights on matters affecting a
single class. As of September 30, 2006, there have been no sales of Class I
Shares.
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. Interest rate swaps are valued using market
quotations from brokers. 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 September 30, 2006, the Fund had $1,546,575 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.
23
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 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, if any, to
its shareholders. Therefore, no provision for federal income taxes is required.
At September 30, 2006, the cost and related gross unrealized appreciation
and depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $114,292,111
============
Gross tax unrealized appreciation........................... $ 5,200,124
Gross tax unrealized depreciation........................... (5,897)
------------
Net tax unrealized appreciation on investments.............. $ 5,194,227
============
</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 gains on futures transactions. All
short-term capital gains and a portion of futures gains are included as ordinary
income for tax purposes.
The tax character of distributions paid during the years ended September 30,
2006 and 2005 were as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $ 140,635 $ 384
Tax-exempt income......................................... 4,392,841 4,114,874
Long-term capital gain.................................... 2,171,980 -0-
---------- ----------
$6,705,456 $4,115,258
========== ==========
</Table>
Due to inherent differences in the recognition of income, expenses, and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities. Permanent book and tax differences relating to the
Fund's investment in other regulated investment companies totaling $2,281 was
reclassified from accumulated undistributed net investment income to accumulated
net realized gain.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 7,306
Undistributed tax-exempt income............................. 622,012
Undistributed long-term capital gain........................ 91,886
</Table>
Net realized gains and losses may differ for financial reporting and tax
purposes primarily as a result of gains and losses recognized for tax purposes
on open futures transactions on September 30, 2006.
24
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
F. EXPENSE REDUCTION During the year ended September 30, 2006, the Fund's
custody fee was reduced by $3,982 as a result of credit 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.......................................... .470%
Over $500 million........................................... .445%
</Table>
For the year ended September 30, 2006, the Adviser voluntarily waived
$298,224 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 year ended September 30, 2006, the Fund recognized expenses of
approximately $7,500 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 Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the year ended September 30,
2006, the Fund recognized expenses of approximately $48,700 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Legal" expenses on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses 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 year ended
September 30, 2006, the Fund recognized expenses of approximately $49,400
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 $74,047 are included in
"Other" assets on the Statement of Assets and Liabilities at September 30, 2006.
25
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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.
For the year ended September 30, 2006, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $33,400 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $47,600. Sales charges do not represent expenses of the
Fund.
3. CAPITAL TRANSACTIONS
For the years ended September 30, 2006 and 2005, transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A........................... 1,111,770 $ 18,163,119 948,370 $ 15,809,067
Class B........................... 122,535 2,005,119 104,295 1,729,569
Class C........................... 108,099 1,782,996 207,093 3,445,612
---------- ------------ ---------- ------------
Total Sales......................... 1,342,404 $ 21,951,233 1,259,758 $ 20,984,248
========== ============ ========== ============
Dividend Reinvestment:
Class A........................... 182,158 $ 2,972,744 103,277 $ 1,720,306
Class B........................... 74,600 1,204,963 46,953 780,802
Class C........................... 41,056 649,285 23,912 398,059
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 297,814 $ 4,826,992 174,142 $ 2,899,167
========== ============ ========== ============
Repurchases:
Class A........................... (878,472) $(14,316,761) (731,919) $(12,170,713)
Class B........................... (495,061) (8,061,368) (437,927) (7,282,119)
Class C........................... (178,507) (2,908,585) (197,540) (3,287,216)
---------- ------------ ---------- ------------
Total Repurchases................... (1,552,040) $(25,286,714) (1,367,386) $(22,740,048)
========== ============ ========== ============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the year ended September 30,
2006, the Fund received redemption fees of approximately $2, which are reported
as part of "Cost of Shares Repurchased" in the Statement of Changes in Net
Assets. The per share impact from redemption fees paid to the Fund was less than
$0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $37,494,310 and $35,349,645,
respectively.
26
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
6. 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 may use derivative instruments for a variety of reasons such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective 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 the unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when taking delivery of a security underlying a
futures contract. In this instance, the recognition of gain or loss is postponed
until the disposal of the security underlying the futures contract.
Summarized below are the different types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS During the period, the Fund invested in futures contracts,
a type of derivative investment. 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 or Notes for duration and risk management purposes 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 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 year ended September 30, 2006 are
as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2005........................... 237
Futures Opened.............................................. 593
Futures Closed.............................................. (801)
----
Outstanding at September 30, 2006........................... 29
====
</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 specific factor. As the floating rate rises, the coupon is
reduced. Conversely, as the floating rate declines, the coupon is increased. The
price of these securities may be more volatile than the price of a comparable
fixed rate security. These instruments are typically used by the Fund to enhance
the yield of the portfolio. These securities are identified on the Portfolio of
Investments.
C. INTEREST RATE SWAPS The Fund may enter into forward interest rate swap
transactions intended to help the Fund manage its overall interest rate
sensitivity, either shorter or longer, generally to more closely align the
Fund's interest rate sensitivity with that of the broader municipal market.
Forward interest rate swap transactions involve the Fund's agreement with
27
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
a counterparty to pay, in the future, a fixed or variable rate payment in
exchange for the counterparty paying the Fund a variable or fixed rate payment,
the accruals for which would begin at a specified date in the future (the
"effective date"). The amount of the payment obligation is based on the notional
amount of the forward swap contract and the termination date of the swap (which
is akin to a bond's maturity). The value of the Fund's swap commitment would
increase or decrease based primarily on the extent to which long-term interest
rates for bonds having a maturity of the swap's termination date increases or
decreases. The Fund may terminate a swap contract prior to the effective date,
at which point a realized gain or loss is recognized. When a forward swap is
terminated, it ordinarily does not involve the delivery of securities or other
underlying assets or principal, but rather is settled in cash on a net basis.
The Fund intends, but is not obligated, to terminate its forward swaps before
the effective date. Accordingly, the risk of loss with respect to the swap
counterparty on such transactions is limited to the credit risk associated with
a counterparty failing to honor its commitment to pay any realized gain to the
Fund upon termination. To reduce such credit risk, all counterparties are
required to pledge collateral daily (based on the daily valuation of each swap)
on behalf of the Fund with a value approximately equal to the amount of any
unrealized gain. Reciprocally, when the Fund has an unrealized loss on a swap
contract, the Fund has instructed the custodian to pledge cash or liquid
securities as collateral with a value approximately equal to the amount of the
unrealized loss. Collateral pledges are monitored and subsequently adjusted if
and when the swap valuations fluctuate. Restricted cash, if any, for segregating
purposes is shown on the Statement of Assets and Liabilities.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees 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. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $79,200 and $0 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, the distribution fee is
reduced.
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action 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 Van Kampen funds. The complaint
28
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2006 continued
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
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal, which is located at the back of this Report.
9. 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.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The impact to the
Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
29
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen New York Tax Free Income
Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen New York Tax Free Income Fund (the "Fund"), including the portfolio of
investments, as of September 30, 2006, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen New York Tax Free Income Fund at September 30, 2006, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
November 14, 2006
30
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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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
One Lincoln Street
Boston, Massachusetts 02111
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
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
September 30, 2006. The Fund designated 99.99% of the income distributions as
a tax-exempt income distributions as a tax-exempt income distribution. The
Fund designated and paid $2,171,980 as a long-term capital gain distribution.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
31
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
32
<Table>
<Caption>
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
33
<Table>
<Caption>
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1994 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
34
<Table>
<Caption>
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1994 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. (64) Trustee Trustee Chief Communications 71 Trustee/Director/Managing
815 Cumberstone Road since 1999 Officer of the National General Partner of funds
Harwood, MD 20776 Academy of in the Fund Complex.
Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
35
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 1994 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
36
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
</Table>
37
<Table>
<Caption>
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
</Table>
38
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen -- as well as several other
decisions by other judges in the Southern District of New York and certain other
courts that have dismissed similar complaints against other investment funds --
plaintiff in the derivative action has determined that the suit would be
unsuccessful, if pursued further. Accordingly, plaintiff has asked Judge Owen to
dismiss the action. No attorneys' fees will be paid by defendants and no
consideration will be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than December 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen New York Tax Free Income Fund
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.
(continued on next page)
Van Kampen New York Tax Free Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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, 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
(continued on back)
Van Kampen New York Tax Free Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
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.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
235, 325, 425
NYTF ANR 11/06
(VAN KAMPEN INVESTMENTS LOGO) RN06-03199P-Y09/06
Item 2. Code of Ethics.
(a) The Trust has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Trust or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Trust's Code of Ethics is attached hereto as Exhibit 12A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Trust's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Rod Dammeyer, Jerry D. Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2006
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES .............. $243,100 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ... $ 0 $ 706,000(2)
TAX FEES ............. $ 15,300(3) $ 79,422(4)
ALL OTHER FEES ....... $ 0 $ 832,851(5)
TOTAL NON-AUDIT FEES .... $ 15,300 $1,618,273
TOTAL ................... $258,400 $1,618,273
2005
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES .............. $234,800 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ... $ 0 $280,000(2)
TAX FEES ............. $ 13,500(3) $ 58,688(4)
ALL OTHER FEES ....... $ 0 $655,125(5)
TOTAL NON-AUDIT FEES .... $ 13,500 $993,813
TOTAL ................... $248,300 $993,813
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any
entity controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial
statements of the Covered Entities' and funds advised by the Adviser or its
affiliates, specifically attestation services provided in connection with a
SAS 70 Report.
(3) Tax Fees represent tax advice and compliance services provided in
connection with the review of the Registrant's tax.
(4) Tax Fees represent tax advice services provided to Covered Entities,
including research and identification of PFIC entities.
(5) All Other Fees represent attestation services provided in connection with
performance presentation standards and assistance with compliance policies
and procedures.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the Independent Auditors are best
positioned to provide the most effective and efficient services, for reasons
such as its familiarity with the Fund's business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Fund's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for
audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
- ----------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval Policy
and Procedures (the "Policy"), amended as of the date above, supercedes and
replaces all prior versions that may have been amended from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have the
meanings as defined in the Joint Audit Committee Charter.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1.
All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix
B.2. All other Audit-related services not listed in Appendix B.2 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the
Independent Auditors in connection with a transaction initially recommended by
the Independent Auditors, the sole business purpose of which may be tax
avoidance and the tax treatment of which may not be supported in the Internal
Revenue Code and related regulations. The Audit Committee will consult with
Director of Tax or outside counsel to determine that the tax planning and
reporting positions are consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the Tax Services in Appendix B.3. All Tax services involving large and complex
transactions not listed in Appendix B.3 must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the Fund's Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Trust has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: R.
Craig Kennedy, Jerry D. Choate, Rod Dammeyer.
(b) Not applicable.
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 second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) 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: November 21, 2006
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: November 21, 2006
By: /s/ James W. Garrett
----------------------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: November 21, 2006