-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qyg3EKz3zCRiL49fT0UYD6Q4HCZ8UJ2G5t21CRWZgrDHaIrdkNuWTmDLGxQXC9P4 w5R+Jp3QgMAz5IYgg2YDKg== 0000950137-04-004519.txt : 20040528 0000950137-04-004519.hdr.sgml : 20040528 20040528160946 ACCESSION NUMBER: 0000950137-04-004519 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040528 EFFECTIVENESS DATE: 20040528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN TAX FREE TRUST CENTRAL INDEX KEY: 0000774556 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04386 FILM NUMBER: 04838677 BUSINESS ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC STREET 2: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC STREET 2: ONE PARKVIEW PLZ CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST DATE OF NAME CHANGE: 19951219 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT TAX FREE FUND /IL/ DATE OF NAME CHANGE: 19920703 N-CSRS 1 c84426nvcsrs.txt SEMIANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4386 Van Kampen Tax Free Trust - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas, New York, New York 10020 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: 9/30 Date of reporting period: 3/31/04 Item 1. Reports to Shareholders. The Trust's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Insured Tax Free Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2004. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. Income may subject certain individuals to the federal Alternative Minimum Tax (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/04
A SHARES B SHARES C SHARES since 12/14/84 since 05/03/93 since 08/13/93 - ---------------------------------------------------------------------------------------------- W/ MAX. W/ MAX. W/ MAX. 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 8.02% 7.74% 5.02% 5.02% 4.60% 4.60% 10-year 6.07 5.55 5.49 5.49 5.25 5.25 5-year 5.25 4.23 4.44 4.19 4.43 4.43 1-year 4.99 -0.01 4.20 0.21 4.26 3.26 6-month 2.57 -2.30 2.24 -1.74 2.24 1.24 - ---------------------------------------------------------------------------------------------- 30-Day SEC Yield 2.45% 1.81% 1.81%
Past performance is no guarantee of future results and current performance may be lower or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit vankampen.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect their conversion into Class A shares seven years after purchase. The since inception returns for Class C shares reflect their conversion into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004 Van Kampen Insured Tax Free Income Fund is managed by the adviser's Municipal Fixed-Income team. Members of the team include James F. Willison, Managing Director; Joseph R. Arcieri, Executive Director; and Joseph A. Piraro, Vice President.(1) MARKET CONDITIONS The state of the U.S. economy remained mixed over the six-month period under review. On the positive side, economic growth continued to be robust with Gross Domestic Product growth topping 4% in both quarters. While this strength in output has historically triggered fears of rising interest rates, yields remained stubbornly low across the municipal curve. These low yields were partly the result of the continued low levels of observed inflation in the U.S. economy. Unfortunately, they also reflected continuing weakness in the job market, which remained soft throughout the period. The soft job numbers, coupled with persistently low inflation, led the Federal Open Market Committee (the Fed) to maintain its accommodative stance throughout the period. In keeping with the general trend for calendar year 2003, the six months under review saw record levels of issuance as municipalities sought to take advantage of historically low interest rates. Many cities and states moved to reduce expenditures by refinancing existing debt and replacing it with lower-yielding bonds. In other cases, municipalities attempted to meet current and future funding needs by issuing new debt. Low interest rates also had an impact on the demand for municipal bonds. Retail and institutional investor activity slowed as holders of municipal bonds saw little reason to sell bonds purchased at higher yield levels and reinvest at historically low yields. However, the period was marked by rising activity among non-traditional investors such as hedge funds and insurance companies seeking to take advantage of the perceived attractiveness of municipal bonds relative to taxable securities. Additionally, investors' search for yield led to significant outperformance by lower-rated bonds with greater credit risk. Sectors such as health care, with a preponderance of lower-rated issues, performed particularly well. California remained in the municipal spotlight during the period, with many investors anxiously awaiting the result of the March 2 referendum on Propositions 57 and 58. These two measures, which voters ultimately approved, gave the green light to an estimated $15 billion economic-improvement bond issuance that will begin to come to the market in early June. The passage of these measures led the major ratings agencies to increase their outlooks (though not their ratings) for the beleaguered state's bonds, with S&P shifting from (1)Team members may change at any time without notice. 2 stable to positive and Moody's shifting from negative to stable. This surge in issuance will at least partially offset the surprising decline in new debt in the first quarter of 2004, which was one-third lower than the level for the first quarter of last year. The majority of debt issued by the state for the entire six-month period offered credit enhancements, with fully two-thirds coming to market with credit insurance. PERFORMANCE ANALYSIS The fund returned 2.57 percent for the six months ended March 31, 2004 (Class A shares, unadjusted for sales charges), underperforming its benchmark, the Lehman Brothers Municipal Bond Index. (See table below). Our analysis of the economy and interest rates indicated that the next major movement in rates was likely to be upward, which we believed warranted a more defensive positioning. As a result, we chose to emphasize securities that we believed provided sufficient return potential and were most likely to hold up well in a rising interest-rate environment. This approach led us to de-emphasize bonds from the long end of the yield curve given their high sensitivity to interest rates and low coupons; instead, we focused on securities with premium coupons from the 18- to 22-year segment of the market in the belief that these bonds offered the most attractive risk/reward profile. We also kept the fund's overall duration (a measure of interest-rate sensitivity) below that of the benchmark. Unfortunately, the longer segment of the yield curve outperformed strongly during the period, and our defensive stance hampered performance. In keeping with the fund's mandate, we maintained our long-term discipline of only buying bonds with the highest credit ratings. Some of the securities we purchased during the period carried the backing of XCLA, a relatively new credit insurer. This company is rated AAA by both Moody's and S&P, and as a result its bonds are well within the fund's investment universe. We maintained the portfolio's diversification over the reporting period. The fund's holdings were spread across the full spectrum of municipal bond-market sectors in order to limit the risk of over-concentration in any one segment. At the end of the period, the portfolio's largest sector weightings were public education at 13.4 percent, followed by wholesale electric at 12.1 percent and public building at 11.9 percent. We also kept the fund well diversified TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
- -------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 2.57% 2.24% 2.24% 3.12% - --------------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and an index definition. 3 geographically, with an emphasis on maintaining balanced exposure across higher-yielding specialty states such as California and Florida. We anticipate that rates will eventually begin to move upward. That being said, we believe the fund is positioned to continue to provide investors with attractive income across an array of possible market environments. We will continue to scour the insured municipal market for attractive investment opportunities. TOP 5 SECTORS AS OF 3/31/04 TOP 5 STATES AS OF 3/31/04 Public Education 13.4% Illinois 17.5% Wholesale Electric 12.1 Texas 13.1 Public Building 11.9 California 8.6 Water & Sewer 10.9 Florida 8.2 Airport 9.0 Washington 7.8
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. All percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MUNICIPAL BONDS 98.1% ALABAMA 2.0% $ 2,255 Alabama St Brd Ed Rev George C Wallace Cmnty College (AMBAC Insd)........................... 5.250% 07/01/23 $ 2,424,937 1,760 Alabama St Brd Ed Rev Shelton St Cmnty College Rfdg (AMBAC Insd).............................. 5.500 10/01/10 2,030,389 1,525 Alabama Wtr Pollutn Ctl Auth (AMBAC Insd)...... 5.500 08/15/13 1,742,312 1,955 Alabama Wtr Pollutn Ctl Auth Revolving Fd Ln Ser A (AMBAC Insd)............................. 6.750 08/15/17 2,095,486 3,120 Huntsville, AL Hlthcare Auth Ser A (MBIA Insd).......................................... 5.400 06/01/22 3,401,424 3,000 Huntsville, AL Hlthcare Auth Ser A (MBIA Insd).......................................... 5.500 06/01/27 3,273,210 1,030 Jefferson Cnty, AL Swr Rev Cap Impt Wt (Prerefunded @ 08/01/12) (FGIC Insd)........... 5.000 02/01/41 1,155,588 1,000 Mobile, AL Wtr & Swr Commr Wt (FGIC Insd)...... 5.250 01/01/20 1,079,420 5,500 Morgan Cnty Decatur, AL Hlthcare Auth Hosp Rev Decatur Gen Hosp Rfdg (Connie Lee Insd)........ 6.250 03/01/13 5,630,295 2,400 Muscle Shoals, AL Util Brd Wtr & Swr Rev (FSA Insd).......................................... 6.500 04/01/16 2,448,000 -------------- 25,281,061 -------------- ALASKA 0.5% 4,130 Anchorage, AK Ser A (FGIC Insd)................ 5.500 06/01/17 4,632,662 1,425 Anchorage, AK Wtr Rev Rfdg (AMBAC Insd)........ 6.000 09/01/19 1,662,818 -------------- 6,295,480 -------------- ARIZONA 0.9% 1,000 Arizona Sch Fac Brd Ctf Part Ser A (MBIA Insd).......................................... 5.250 09/01/17 1,106,770 2,900 Arizona Tourism & Sports Auth Multi Purp Stad Fac Ser A (MBIA Insd).......................... 5.375 07/01/22 3,190,290 895 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig Irvington Proj Tucson Elec Pwr Co Ser A Rfdg (FSA Insd)................................ 7.250 07/15/10 940,734 1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)................... 6.000 09/01/12 2,130,337 1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)................... 6.125 09/01/17 1,997,940 1,900 Tempe, AZ High Sch Dist No 213 Rfdg (FSA Insd) (a)............................................ 3.000 07/01/09 1,949,723 -------------- 11,315,794 -------------- ARKANSAS 0.7% 1,520 Arkansas Dev Fin Auth St Pk Mt Magazine Proj (FSA Insd)..................................... 5.000 01/01/20 1,628,315 6,265 Little Rock, AR Sch Dist Ser B Rfdg (FSA Insd).......................................... 5.500 02/01/25 6,827,472 -------------- 8,455,787 --------------
6 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- CALIFORNIA 8.4% $ 3,270 Alhambra, CA Redev Agy Tax Indl Redev Proj Rfdg (FSA Insd)..................................... 5.000% 05/01/19 $ 3,510,443 2,400 Anaheim, CA Uni High Sch Dist Election 2002 (MBIA Insd).................................... 5.000 08/01/27 2,506,296 2,835 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy Pool Rev Ser A (FSA Insd).................. 6.000 12/15/14 2,981,513 2,060 Burbank, CA Pub Fin Auth Golden State Redev Proj Ser A (AMBAC Insd)........................ 5.250 12/01/21 2,249,973 5,000 California St (XLCA Insd)...................... 5.000 10/01/28 5,169,600 3,000 California St (CIFG Insd)...................... 5.000 02/01/29 3,092,940 10,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd) (b)...................................... 5.500 05/01/16 11,307,500 5,000 California St Dept Wtr Res Pwr Ser A (XLCA Insd).......................................... 5.375 05/01/17 5,589,650 5,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).......................................... 5.375 05/01/18 5,541,700 3,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)............................... 5.375 10/01/20 3,286,860 3,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)............................... 5.000 10/01/22 3,149,280 4,000 California Statewide Cmntys Dev Auth Wtr Rev Pooled (FSA Insd).............................. 5.250 10/01/34 4,248,280 425 Earlimart, CA Elem Sch Dist Ser 1 (AMBAC Insd).......................................... 6.700 08/01/21 551,467 3,205 El Dorado, CA Irr Dist Ctf Ser A (FGIC Insd)... 5.000 03/01/21 3,400,056 265 Golden West Sch Fin Auth CA Rev Ser A Rfdg (MBIA Insd).................................... 5.750 08/01/19 316,908 6,500 Grossmont, CA Uni High Sch Dist Cft Part (MBIA Insd).......................................... * 11/15/21 2,107,235 5,000 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B (FSA Insd)..................................... 5.000 07/01/26 5,215,950 8,265 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B (FSA Insd)..................................... 5.000 07/01/27 8,609,237 3,580 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B (FSA Insd)..................................... 5.000 07/01/28 3,726,350 2,000 Metropolitan Wtr Dist South CA Auth Ser B 1 (FGIC Insd).................................... 5.000 10/01/29 2,086,840 5,000 Port Oakland, CA Port Rev Ser I Rfdg (MBIA Insd).......................................... 5.600 11/01/19 5,638,850 2,525 Poway, CA Ctf Part City Office Bldg Proj (AMBAC Insd).......................................... 5.000 01/01/23 2,651,654 2,250 Riverside, CA Ctf Part (AMBAC Insd)............ 5.000 09/01/23 2,369,925 1,245 Salinas, CA Ctf Part Monterey Str Pkg Structure A (AMBAC Insd)................................. 5.000 09/01/28 1,293,767 9,285 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd).... 5.375 03/01/18 10,304,957
See Notes to Financial Statements 7 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $ 2,000 Santa Rosa, CA Wastewtr Rev Cap Apprec Ser B (AMBAC Insd)................................... * 09/01/19 $ 964,780 135 Upland, CA Pub Fin Auth Rev Lease Wtr Sys Impt Proj (AMBAC Insd).............................. 5.000% 10/01/27 141,074 3,000 Vallejo City, CA Uni Sch Ser A Rfdg (MBIA Insd).......................................... 5.900 08/01/25 3,611,370 2,000 William S Hart CA Jt Sch Fin Auth Spl Tax Rev Cmnty Fac Rfdg (FSA Insd)...................... 6.500 09/01/14 2,177,880 -------------- 107,802,335 -------------- COLORADO 4.5% 2,000 Arapahoe, CO Pk & Rec Dist (FGIC Insd)......... 5.250 12/01/22 2,162,440 1,035 Colorado St Colleges Brd Ser B Rfdg (MBIA Insd).......................................... 5.000 05/15/22 1,094,347 11,850 Denver, CO City & Cnty Arpt Rev Ser A (MBIA Insd).......................................... 5.700 11/15/25 12,727,018 3,605 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/16 4,168,534 4,310 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/17 4,972,447 4,505 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/18 5,181,786 5,345 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/20 6,106,395 3,265 Denver, CO Convention Ctr Sr Ser A (XLCA Insd).......................................... 5.000 12/01/17 3,544,908 2,000 Denver, CO Convention Ctr Sr Ser A (XLCA Insd).......................................... 5.000 12/01/22 2,107,240 6,320 Denver, CO Convention Ctr Sr Ser A (XLCA Insd).......................................... 5.000 12/01/28 6,578,678 2,000 Fremont Cnty, CO Ctf Part & Impt Ser A Rfdg (MBIA Insd).................................... 5.250 12/15/26 2,137,540 1,175 Thornton, CO Ctf Part (AMBAC Insd)............. 5.375 12/01/19 1,295,625 3,080 Thornton, CO Ctf Part (AMBAC Insd)............. 5.375 12/01/21 3,379,160 1,650 Thornton, CO Ctf Part (AMBAC Insd)............. 5.375 12/01/22 1,801,420 -------------- 57,257,538 -------------- DISTRICT OF COLUMBIA 0.3% 1,000 District of Columbia Ctf Part Dist Pub Safety & Emergency (AMBAC Insd)......................... 5.500 01/01/19 1,115,350 2,000 District of Columbia Ctf Part Dist Pub Safety & Emergency (AMBAC Insd)......................... 5.500 01/01/20 2,218,800 -------------- 3,334,150 -------------- FLORIDA 8.1% 1,000 Brevard Cnty, FL Sch Brd Ctf Part Ser A (AMBAC Insd).......................................... 5.400 07/01/12 1,155,850 7,055 Broward Cnty, FL Sch Brd Ctf (MBIA Insd)....... 5.250 07/01/17 7,860,681 500 Dade Cnty, FL Aviation Rev Ser B (MBIA Insd)... 5.600 10/01/26 543,885 1,000 Dade Cnty, FL Ed Fac Auth Rev Exchanged From Univ of Miami Ser B (MBIA Insd)................ 5.750 04/01/20 1,088,190 750 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC Insd).... 5.375 10/01/16 834,375
8 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 1,250 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd).......................................... 5.950% 07/01/20 $ 1,314,750 1,000 Escambia Cnty, FL Util Auth Util Sys Rev (FGIC Insd).......................................... 5.250 01/01/24 1,061,770 1,000 Florida Intergovnmtl Fin Ser C1 (AMBAC Insd)... 5.125 02/01/31 1,040,230 575 Florida Muni Ln Council Rev Ser B (MBIA Insd).......................................... 5.750 11/01/14 670,387 1,185 Florida St Brd of Ed Cap Outlay Pub Ed Ser C (FGIC Insd).................................... 5.000 06/01/23 1,243,634 2,000 Florida St Brd of Ed Cap Outlay Pub Ed Ser C (FGIC Insd).................................... 5.750 06/01/29 2,262,280 1,250 Florida St Brd of Ed Lottery Rev Ser A (FGIC Insd).......................................... 6.000 07/01/12 1,468,362 1,000 Florida St Brd of Ed Lottery Rev Ser A (FGIC Insd).......................................... 6.000 07/01/14 1,178,250 2,750 Florida St Brd of Ed Lottery Rev Ser B (FGIC Insd).......................................... 5.250 07/01/13 3,074,225 750 Florida St Brd of Regt Hsg Rev (MBIA Insd)..... 5.750 07/01/14 871,680 1,365 Florida St Correctional Privatization Commn Ctf Part (MBIA Insd)............................... 5.375 08/01/14 1,550,422 1,750 Florida St Div Bd Fin Dept Gen Svc Rev Dept Environmental Prot Presvtn 2000 Ser A (AMBAC Insd).......................................... 5.000 07/01/12 1,919,697 1,500 Florida St Div Bd Fin Dept Gen Svc Rev Dept Environmental Prot Presvtn 2000 Ser B (FSA Insd).......................................... 5.250 07/01/11 1,676,850 1,000 Florida St Muni Pwr Agy Rev Stanton Proj Rfdg (FSA Insd)..................................... 5.500 10/01/14 1,146,740 2,080 Florida St Muni Pwr Agy Rev Stanton Proj Rfdg (FSA Insd)..................................... 5.500 10/01/15 2,366,374 500 Gulf Breeze, FL Rev Loc Govt (Variable Rate Coupon) (FGIC Insd)............................ 5.650 12/01/20 554,675 1,340 Gulf Breeze, FL Rev Venice Loc Govt (FGIC Insd).......................................... 5.150 12/01/20 1,466,215 1,480 Hillsborough Cnty, FL Sch Brd (AMBAC Insd)..... 5.375 10/01/16 1,655,454 1,300 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC Insd).......................................... 5.500 08/01/11 1,511,627 1,000 Indian River Cnty, FL Hosp Rev Rfdg (FSA Insd).......................................... 6.100 10/01/18 1,120,100 1,000 Jacksonville, FL Cap Impt Rev Crossover Ser B Rfdg (AMBAC Insd).............................. 5.250 10/01/14 1,129,830 3,210 Jacksonville, FL Cap Impt Rev Crossover Ser B Rfdg (AMBAC Insd).............................. 5.250 10/01/15 3,593,627 1,750 Jea, FL Wtr & Swr Sys Rev Ser A (MBIA Insd).... 5.375 10/01/30 1,855,735 1,000 Key West, FL Util Brd Elec Rev Cap Apprec Ser D (Escrowed to Maturity) (AMBAC Insd)............ * 10/01/13 704,910 1,000 Miami-Dade Cnty, FL Hlth Fac Miami Childrens Hosp Ser A Rfdg (AMBAC Insd)................... 5.125 08/15/26 1,045,630
See Notes to Financial Statements 9 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 1,000 Orange Cnty, FL Sch Brd Ctfs Partn Ser A (AMBAC Insd).......................................... 5.250% 08/01/14 $ 1,134,150 1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive Universal Blvd Rfdg (AMBAC Insd)............... 5.125 04/01/19 1,076,730 1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive Universal Blvd Rfdg (AMBAC Insd)............... 5.125 04/01/20 1,071,070 1,000 Palm Beach Cnty, FL Pub Impt Rev Convention Ctr Proj (Prerefunded @ 11/01/11) (FGIC Insd)...... 5.125 11/01/30 1,138,860 1,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).......................................... 5.500 08/01/16 1,124,670 4,180 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).......................................... 5.000 08/01/18 4,531,496 800 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).......................................... 5.125 08/01/26 840,904 4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA Insd).......................................... 5.000 08/01/21 4,235,800 4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA Insd).......................................... 5.000 08/01/22 4,218,520 1,000 Pembroke Pines, FL Charter Sch Ser A (MBIA Insd).......................................... 5.000 07/01/26 1,042,120 750 Polk Cnty, FL Sch Brd Ctf Part Master Lease Ser A (FSA Insd)................................... 5.500 01/01/16 836,512 1,700 Port Palm Beach Dist FL Rev Impt Rfdg (XLCA Insd).......................................... * 09/01/25 577,541 1,000 Port Saint Lucie, FL Spl Assmt Rev Util Svc Area No 3 & 4A (MBIA Insd)..................... 5.000 10/01/18 1,068,010 1,000 Reedy Creek, FL Impt Dist FL Ser 2 Rfdg (MBIA Insd).......................................... 5.500 10/01/13 1,146,760 1,000 Reedy Creek, FL Impt Dist FL Ser A Rfdg (AMBAC Insd).......................................... 5.500 06/01/12 1,142,910 535 Saint Johns Cnty, FL Indl Dev Auth Professional Golf Proj Rfdg (MBIA Insd)..................... 5.250 09/01/12 606,299 1,000 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA Insd).......................................... 5.000 07/01/21 1,058,450 3,245 Santa Rosa Bay Brdg Auth FL Rev Cap Apprec (MBIA Insd).................................... * 07/01/18 1,736,789 1,515 Seminole Cnty, FL Sales Tax Rev (FGIC Insd).... 5.375 10/01/16 1,692,967 4,000 Sunrise, FL Util Sys Rev Rfdg (AMBAC Insd)..... 5.200 10/01/22 4,378,640 10,000 Tallahassee, FL Hlth Fac Rev Tallahassee Mem Regl Med Ser A Rfdg (MBIA Insd) (b)............ 6.625 12/01/13 10,526,900 1,890 Tampa Bay, FL Sales Tax Rev Ser A (AMBAC Insd).......................................... 5.375 10/01/17 2,106,764 1,000 Village Ctr Cmnty Dev Dist FL Ser A (MBIA Insd).......................................... 5.200 11/01/25 1,062,590 3,735 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry Riddle Ser B Rfdg (AMBAC Insd)................. 5.250 10/15/19 4,071,374
10 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 1,000 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry Riddle Ser B Rfdg (AMBAC Insd)................. 5.250% 10/15/22 $ 1,076,330 500 Volusia Cnty, FL Hlth Fac Auth Rev Hosp Fac Mem Hlth Impt & Rfdg (AMBAC Insd).................. 5.750 11/15/13 522,570 -------------- 102,992,161 -------------- GEORGIA 3.3% 1,600 Athens, GA Hsg Auth Student East Campus Hsg Rfdg (AMBAC Insd).............................. 5.250 12/01/18 1,764,640 4,150 Georgia Muni Elec Auth Pwr Rev Cap Apprec Gen Ser B (BIGI Insd).............................. * 01/01/08 3,785,007 4,000 Georgia Muni Elec Auth Pwr Rev Gen Ser A (MBIA Insd).......................................... 6.500 01/01/12 4,783,800 14,690 Georgia Muni Elec Auth Pwr Rev Ser Y (AMBAC Insd).......................................... 6.400 01/01/13 17,788,562 9,590 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA Insd).......................................... 6.500 01/01/17 11,862,350 860 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (AMBAC Insd)...................... 6.400 01/01/13 1,043,851 410 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (MBIA Insd)....................... 6.500 01/01/17 509,700 -------------- 41,537,910 -------------- ILLINOIS 17.2% 4,480 Berwyn, IL Rfdg (AMBAC Insd)................... 5.000 12/01/13 5,049,990 2,215 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd).......................................... * 01/01/19 1,097,178 2,595 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd).......................................... * 01/01/20 1,210,619 6,225 Chicago, IL Brd of Ed Cap Apprec Sch Reform B 1 (FGIC Insd).................................... * 12/01/15 3,778,201 2,845 Chicago, IL Brd of Ed Cap Apprec Sch Reform B 1 (FGIC Insd).................................... * 12/01/19 1,353,167 1,500 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser A (FGIC Insd).................................. * 12/01/19 713,445 1,020 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser A (FGIC Insd).................................. * 12/01/25 338,232 8,000 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser A (FGIC Insd).................................. * 12/01/29 2,131,520 3,250 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser A (FGIC Insd).................................. * 12/01/30 820,300 2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (c)...................................... 0/5.700 01/01/25 1,936,360 2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (c)...................................... 0/5.750 01/01/29 1,932,140 2,840 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/21 3,039,993
See Notes to Financial Statements 11 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 2,975 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.250% 01/01/22 $ 3,179,621 3,120 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/23 3,321,833 3,280 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/24 3,473,520 5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.000 01/01/34 5,137,550 8,750 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 239-2 (Acquired 8/18/03, Cost $9,456,386) (FSA Insd) (d)...................................... 10.330 01/01/20 10,686,025 10,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 239-3 (Acquired 8/18/03, Cost $10,715,795) (FSA Insd) (d)...................................... 10.330 01/01/21 12,212,600 2,500 Chicago, IL Park Dist Ser C (FGIC Insd)........ 5.500 01/01/19 2,779,175 10,000 Chicago, IL Proj Ser A Rfdg (FGIC Insd)........ 5.375 01/01/34 10,682,400 5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd)........ 5.500 01/01/38 5,351,450 5,000 Chicago, IL Proj Ser A Rfdg (AMBAC Insd)....... 5.625 01/01/39 5,435,800 5,000 Chicago, IL Sales Tax Rev (Prerefunded @ 01/01/09) (FGIC Insd).......................... 5.375 01/01/30 5,697,550 2,300 Chicago, IL Wtr Rev (FGIC Insd)................ 5.250 11/01/27 2,423,211 1,270 Chicago, IL Wtr Rev Cap Apprec (FGIC Insd)..... * 11/01/10 1,025,550 2,055 Cook Cnty, IL Cmnty Cons Sch Dist No 015 Palatine Cap Apprec (FSA Insd)................. * 12/01/10 1,655,179 2,895 Cook Cnty, IL Cmnty Sch Dist Ser B (FGIC Insd).......................................... 9.000 12/01/14 4,261,179 1,505 Cook Cnty, IL Sch Dist No 100 Berwyn South (FSA Insd).......................................... 8.200 12/01/14 2,110,823 1,775 Cook Cnty, IL Sch Dist No 100 Berwyn South (FSA Insd).......................................... 8.100 12/01/16 2,495,384 2,605 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd).......................................... * 12/01/17 1,401,438 2,995 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd).......................................... * 12/01/18 1,513,074 4,210 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd).......................................... * 12/01/19 2,000,550 4,050 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd).......................................... * 12/01/20 1,812,699 3,000 Du Page Cnty, IL Cmnty High Sch (FSA Insd)..... 5.600 01/01/22 3,349,590 2,045 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/17 2,250,379 1,860 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/20 2,028,758 1,180 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/21 1,284,784 10,000 Illinois Dev Fin Auth Pollutn Ctl Rev Comwlth Edison Co Proj Ser D Rfdg (AMBAC Insd)......... 6.750 03/01/15 10,677,300 35,000 Illinois Dev Fin Auth Pollutn Ctl Rev IL Pwr Co Proj Ser B First Mtg Rfdg (Acquired 6/09/92, Cost $34,692,780) (MBIA Insd) (d).............. 7.400 12/01/24 37,086,000
12 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 2,000 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford Sch 205 (FSA Insd)............................. 6.650% 02/01/11 $ 2,439,600 5,025 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford Sch 205 (FSA Insd)............................. 6.650 02/01/12 5,645,085 2,000 Illinois Ed Fac Auth Rev DePaul Univ (Prerefunded @ 10/01/10) (AMBAC Insd).......... 5.625 10/01/14 2,347,080 2,000 Illinois Med Dist (MBIA Insd).................. 5.250 06/01/32 2,111,380 3,500 Illinois Muni Elec Agy Pwr Supply Sys Rev Rfdg (FSA Insd)..................................... 5.000 02/01/21 3,653,195 2,000 Kane Cook & Du Page Cntys IL Ser A (FGIC Insd).......................................... 7.000 12/15/11 2,522,880 1,000 Kane Cook & Du Page Cntys IL Ser A (FGIC Insd).......................................... 7.000 12/15/12 1,271,750 2,700 Lake Cnty, IL Cmnty Cons Sch Dist No 50 Woodland Cap Apprec Ser B (FGIC Insd).......... * 12/01/13 1,845,180 1,200 Lake Cnty, IL Cmnty Cons Sch Dist No 50 Woodland Cap Apprec Ser B (FGIC Insd).......... * 12/01/14 774,288 2,500 Lake Cnty, IL Cmnty Cons Sch Dist No 50 Woodland Ser A (FGIC Insd)..................... 6.000 12/01/20 2,840,675 3,440 Lake Cnty, IL Cmnty High Sch Dist No 117 Antioch Cap Apprec Ser B (FGIC Insd)........... * 12/01/10 2,768,890 6,790 Lake Cnty, IL Cmnty Unit Sch Dist No 60 Waukegan Cap Apprec Ser A (FSA Insd)........... * 12/01/17 3,642,156 3,175 Lake Cnty, IL Cmnty Unit Sch Dist No 95 Lake Zurich Cap Apprec (FGIC Insd).................. * 12/01/15 1,927,924 3,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No 158 Cap Apprec (FGIC Insd)..................... * 01/01/17 1,677,840 4,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No 158 Cap Apprec (FGIC Insd)..................... * 01/01/18 2,100,440 2,080 McHenry Cnty, IL Cmnty High Sch Dist No 154 Cap Apprec (FGIC Insd)............................. * 01/01/16 1,236,435 1,000 McHenry Cnty, IL Consv Dist Ser A (FGIC Insd).......................................... 5.500 02/01/16 1,115,420 1,330 McHenry Cnty, IL Consv Dist Ser A (FGIC Insd).......................................... 5.500 02/01/17 1,483,509 6,000 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expn Ser A (MBIA Insd).... 5.250 06/15/42 6,328,740 2,000 Southern IL Univ Rev Cap Apprec Hsg & Aux Ser A (MBIA Insd).................................... * 04/01/20 923,260 1,495 Will Cnty, IL Sch Dist No 017 (AMBAC Insd)..... 5.000 12/01/16 1,628,937 -------------- 219,019,231 -------------- INDIANA 2.7% 2,000 Brownsburg, IN Sch Bldg First Mtg 1999 Ser A (FSA Insd)..................................... 5.250 09/15/22 2,158,400 1,785 Center Grove, IN 2000 Bldg First Mtg (AMBAC Insd).......................................... 5.500 07/15/17 2,003,056 1,885 Center Grove, IN 2000 Bldg First Mtg (AMBAC Insd).......................................... 5.500 07/15/18 2,112,067
See Notes to Financial Statements 13 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- INDIANA (CONTINUED) $ 2,500 Evansville Vanderburgh, IN Pub Lease Corp First Mtg (MBIA Insd)................................ 5.750% 07/15/18 $ 2,803,475 1,855 Hamilton Southeastern, IN Cons First Mtg (FSA Insd).......................................... 5.500 07/15/16 2,081,607 1,075 Hamilton Southeastern, IN Cons First Mtg (FSA Insd).......................................... 5.500 01/15/19 1,197,711 1,420 Indiana Bd Bk Spl Pgm Ser A (Escrowed to Maturity) (AMBAC Insd)......................... 9.750 08/01/09 1,726,464 2,265 Indianapolis, IN Loc Pub Impt Ser B (FSA Insd).......................................... 5.000 01/15/20 2,396,030 2,335 Lake Cnty, IN Bldg Corp First Mtg (MBIA Insd).......................................... 5.750 08/01/11 2,704,374 2,670 Marion Cnty, IN Convention & Rec Lease Rent Ser A Rfdg (AMBAC Insd)............................ 5.000 06/01/20 2,829,933 1,550 Marion Cnty, IN Convention & Rec Lease Rent Ser A Rfdg (AMBAC Insd)............................ 5.000 06/01/21 1,634,398 1,605 Mount Vernon of Hancock Cnty First Mtg Ser B (AMBAC Insd)................................... 5.500 07/15/16 1,801,067 1,695 Mount Vernon of Hancock Cnty First Mtg Ser B (AMBAC Insd)................................... 5.500 07/15/17 1,902,061 4,000 New Albany Floyd Cnty, IN Sch First Mtg (FGIC Insd).......................................... 5.750 07/15/20 4,573,760 2,130 Northwest Allen Cnty, IN First Mtg (MBIA Insd).......................................... 5.250 07/15/19 2,330,433 -------------- 34,254,836 -------------- IOWA 0.2% 2,375 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)................................ 5.750 07/01/17 2,626,631 -------------- KANSAS 1.4% 16,750 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co Proj Rfdg (MBIA Insd).......................... 7.000 06/01/31 17,634,400 275 Dodge, KS Uni Sch Dist No 443 Rfdg (FGIC Insd).......................................... 5.000 09/01/12 310,140 -------------- 17,944,540 -------------- KENTUCKY 0.2% 3,000 Kentucky St Ppty & Bldg Commn Proj No 79 (Prerefunded @ 10/01/13) (MBIA Insd)........... 5.125 10/01/19 3,276,240 -------------- LOUISIANA 2.5% 4,065 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev Lake Charles Mem Hosp Proj Ser A (Connie Lee Insd).......................................... 6.375 12/01/12 4,943,121 5,530 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev Lake Charles Mem Hosp Proj Ser A (Connie Lee Insd).......................................... 6.500 12/01/18 6,908,353 1,375 Greater New Orleans Expwy Impt Rfdg (AMBAC Insd).......................................... 5.250 11/01/15 1,550,931 1,450 Greater New Orleans Expwy Impt Rfdg (AMBAC Insd).......................................... 5.250 11/01/16 1,621,840
14 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- LOUISIANA (CONTINUED) $ 1,525 Greater New Orleans Expwy Impt Rfdg (AMBAC Insd).......................................... 5.250% 11/01/17 $ 1,699,231 1,930 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/16 2,170,169 2,035 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/17 2,275,741 2,150 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/18 2,385,361 2,265 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/19 2,497,525 2,395 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/20 2,629,447 2,000 Louisiana St Office Facs Corp Lease St Capital Complex Pg Rfdg (MBIA Insd).................... 5.250 11/01/18 2,211,580 2,080 New Orleans, LA Home Mtg Auth Single Family Mtg Rev 1985 Ser A (MBIA Insd)..................... * 09/15/16 576,493 -------------- 31,469,792 -------------- MASSACHUSETTS 0.7% 3,000 Massachusetts Muni Whsl Elec Co Nuclear Mix 1-A (MBIA Insd).................................... 5.250 07/01/13 3,382,980 2,500 Massachusetts Muni Whsl Elec Co Proj No 6-A (MBIA Insd).................................... 5.250 07/01/16 2,753,700 1,010 Massachusetts St Cons Ln Ser D (Prerefunded @ 11/01/11) (MBIA Insd).......................... 5.250 11/01/19 1,152,127 1,700 Massachusetts St Hlth & Ed Fac Auth Rev Mt Auburn Hosp Ser B1 (MBIA Insd)................. 6.250 08/15/14 1,762,101 -------------- 9,050,908 -------------- MICHIGAN 1.2% 2,455 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser C Rfdg (MBIA Insd)............................... 5.250 07/01/17 2,729,297 1,400 Huron, MI Sch Dist (FSA Insd).................. 5.250 05/01/21 1,506,876 1,150 Kalamazoo, MI City Sch Dist Bldg & Site (FSA Insd).......................................... 5.250 05/01/16 1,270,704 500 Michigan St Hsg Dev Auth Rental Hsg Rev Ser B (AMBAC Insd)................................... 4.850 04/01/04 500,000 2,500 Michigan St Strategic Fd Ltd Oblig Rev Detroit Ed Conv Rfdg (Variable Rate Coupon) (AMBAC Insd).......................................... 4.850 09/01/30 2,765,675 2,675 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg (FGIC Insd).................................... 5.375 12/01/17 2,976,178 2,840 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg (FGIC Insd).................................... 5.375 12/01/20 3,118,008 -------------- 14,866,738 -------------- MINNESOTA 0.1% 1,000 Brainerd, MN Rev Evangelical Lutheran Ser B Rfdg (FSA Insd)................................ 6.650 03/01/17 1,004,300 --------------
See Notes to Financial Statements 15 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MISSISSIPPI 0.4% $ 1,450 Harrison Cnty, MS Wastewtr Mgmt & Solid Wastewtr Treatment Fac Ser A Rfdg (FGIC Insd).......................................... 5.500% 02/01/08 $ 1,624,247 1,175 Harrison Cnty, MS Wastewtr Mgmt & Solid Wastewtr Treatment Fac Ser A Rfdg (FGIC Insd).......................................... 5.500 02/01/09 1,334,788 1,165 Harrison Cnty, MS Wastewtr Mgmt & Solid Wastewtr Treatment Fac Ser A Rfdg (FGIC Insd).......................................... 5.500 02/01/10 1,334,845 1,000 Harrison Cnty, MS Wastewtr Mgmt & Solid Wastewtr Treatment Fac Ser A Rfdg (FGIC Insd).......................................... 8.500 02/01/13 1,383,110 -------------- 5,676,990 -------------- MISSOURI 0.7% 1,170 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A (FSA Insd)..................................... 5.500 03/01/16 1,305,006 1,225 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A (FSA Insd)..................................... 5.500 03/01/17 1,366,353 3,895 Saint Louis Cnty, MO Regl Conv & Sports Complex Auth Convtn & Sports Fac Rfdg (AMBAC Insd)..... 5.250 08/15/17 4,338,290 1,990 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A (MBIA Insd).................................... 5.375 07/01/17 2,206,353 -------------- 9,216,002 -------------- NEVADA 1.1% 10,000 Director St, NV Dept Business & Ind Las Vegas Monorail Proj First Tier (AMBAC Insd).......... 5.625 01/01/32 11,071,000 2,500 Reno, NV Cap Impt Rev (FGIC Insd).............. 5.125 06/01/26 2,617,300 -------------- 13,688,300 -------------- NEW HAMPSHIRE 0.2% 2,500 New Hampshire St Tpk Sys Rev Ser C Rfdg (Inverse Fltg) (FGIC Insd)..................... 12.375 11/01/17 3,216,150 -------------- NEW JERSEY 2.7% 3,625 Morristown, NJ Rfdg (FSA Insd)................. 6.400 08/01/14 3,929,065 10,000 New Jersey St Trans Corp Ctf Fed Trans Admin Grants Ser A (AMBAC Insd)...................... 5.500 09/15/13 11,654,100 6,800 New Jersey St Trans Corp Ctf Fed Trans Admin Grants Ser A (Prerefunded @ 09/15/09) (AMBAC Insd).......................................... 5.875 09/15/12 7,957,496 5,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser A (AMBAC Insd)................................... 5.500 12/15/14 5,869,100 4,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser C (FSA Insd)..................................... 5.500 06/15/20 4,472,720 -------------- 33,882,481 -------------- NEW YORK 3.5% 5,000 Metropolitan Trans Auth NY Svc Contract Ser A Rfdg (FGIC Insd)............................... 5.000 07/01/25 5,224,700 5,470 New York City Hlth & Hosp Hlth Sys Ser A (FSA Insd).......................................... 5.000 02/15/21 5,762,372
16 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 4,350 New York City Indl Dev Agy Civic Fac Rev USTA Natl Tennis Cent Proj (FSA Insd)............... 6.375% 11/15/14 $ 4,567,326 14,000 New York City Muni Wtr Fin Auth Ser B (MBIA Insd).......................................... 5.500 06/15/27 15,150,660 10,000 New York City Ser I (MBIA Insd) (a)............ 5.000 08/01/17 10,905,400 3,105 New York St Dorm Auth Rev Insd Brooklyn Law Sch Ser B (XLCA Insd).............................. 5.375 07/01/21 3,433,447 15 New York St Med Care Fac Fin Agy Rev (Prerefunded @ 08/15/04) (FSA Insd)............ 6.500 08/15/15 15,603 -------------- 45,059,508 -------------- NORTH CAROLINA 1.3% 1,080 Dare Cnty, NC Ctf Part (AMBAC Insd)............ 5.000 06/01/23 1,131,365 1,540 North Carolina Cap Fac Fin Johnson & Wales Univ Proj Ser A (XLCA Insd)......................... 5.000 04/01/20 1,641,655 10,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd).......................................... 5.250 01/01/18 10,988,200 2,835 North Carolina Muni Pwr Agy Ser A (MBIA Insd).......................................... 5.250 01/01/19 3,097,578 -------------- 16,858,798 -------------- NORTH DAKOTA 0.9% 5,000 Mercer Cnty, ND Pollutn Ctl Rev Antelope Vly Station Rfdg (AMBAC Insd)...................... 7.200 06/30/13 6,280,750 5,000 Oliver Cnty, ND Pollutn Ctl Rev Square Butte Elec Coop Ser A Rfdg (AMBAC Insd).............. 5.300 01/01/27 5,238,850 -------------- 11,519,600 -------------- OHIO 0.3% 3,175 Miami Univ OH Gen Rcpt Rfdg (AMBAC Insd)....... 5.250 12/01/19 3,510,534 -------------- OKLAHOMA 2.5% 1,355 Jenks, OK Aquarium Auth Rev First Mtg (Prerefunded @ 07/01/10) (MBIA Insd)........... 6.000 07/01/20 1,580,499 1,000 McAlester, OK Pub Wks Auth Util Cap Apprec (FSA Insd).......................................... * 02/01/34 217,600 8,320 McAlester, OK Pub Wks Auth Util Cap Apprec Ser A (FSA Insd)................................... * 02/01/30 2,016,269 2,680 McAlester, OK Pub Wks Auth Util Cap Apprec Ser A (Prerefunded @ 02/01/09) (FSA Insd).......... * 02/01/30 726,709 2,100 Midwest City, OK Muni Auth (Prerefunded @ 06/01/10) (FSA Insd)........................... 5.150 06/01/15 2,391,732 5,660 Mustang, OK Impt Auth Util Rev (FSA Insd)...... 5.800 10/01/30 6,435,760 2,020 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser A (FSA Insd)..................................... 5.000 07/01/17 2,161,723 4,000 Sapulpa, OK Muni Auth Cap Impt Rev Rfdg (Prerefunded @ 07/01/10) (FSA Insd)............ 5.750 07/01/30 4,712,000
See Notes to Financial Statements 17 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- OKLAHOMA (CONTINUED) $ 2,000 Tulsa, OK Cmnty College Rev (AMBAC Insd)....... 5.500% 07/01/22 $ 2,228,240 8,260 Tulsa, OK Tulsa Indl Auth Rev Univ Tulsa Ser A (MBIA Insd).................................... 5.375 10/01/31 8,885,365 -------------- 31,355,897 -------------- OREGON 1.1% 1,000 Emerald Peoples Util Dist Ser A Rfdg (FSA Insd).......................................... 5.250 11/01/21 1,094,910 2,000 Oregon St Dept Admin Ser A Rfdg (FSA Insd)..... 5.000 04/01/14 2,266,640 4,835 Oregon St Dept Admin Ser B Rfdg (MBIA Insd).... 5.250 05/01/17 5,328,412 1,300 Portland, OR Arpt Rev Ser 15 Intl Arpt Ser A Rfdg (FGIC Insd)............................... 5.000 07/01/13 1,436,591 3,250 Salem-Keizer, OR Sch Dist Rfdg (FSA Insd)...... 5.000 06/15/17 3,564,210 -------------- 13,690,763 -------------- PENNSYLVANIA 3.7% 5,000 Allegheny Cnty, PA Hosp Dev Auth Rev Insd Hlth Sys Ser A (MBIA Insd).......................... 6.500 11/15/30 5,849,000 4,875 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh Mercy Hlth Sys Inc (Escrowed to Maturity) (AMBAC Insd)................................... 5.625 08/15/26 5,328,716 10,000 Harrisburg, PA Res Gtd Sub Ser D 2 (FSA Insd).......................................... 5.000 12/01/33 11,028,300 3,000 Lycoming Cnty, PA Auth College Rev PA College of Technology (AMBAC Insd)..................... 5.350 07/01/26 3,188,610 1,375 Pennsylvania St Higher Ed Fac Auth Rev St Sys Higher Ed Ser P (AMBAC Insd)................... 5.000 12/15/16 1,491,050 4,340 Philadelphia, PA Gas Wks Rev 1975 Gen Ordinance 17th Ser (FSA Insd)............................ 5.375 07/01/17 4,970,559 2,990 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd)............................. 5.250 08/01/18 3,316,687 4,555 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd)............................. 5.250 08/01/21 4,974,197 2,000 Philadelphia, PA Sch Dist Ser A (FSA Insd)..... 5.500 02/01/26 2,169,820 5,000 State Pub Sch Bldg Auth PA Sch Lease Philadelphia Sch Dist Proj (FSA Insd).......... 5.250 06/01/26 5,350,550 -------------- 47,667,489 -------------- SOUTH CAROLINA 0.7% 2,430 Columbia, SC Ctf Part Tourism Dev Fee Pledge (AMBAC Insd)................................... 5.250 06/01/19 2,662,016 6,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser A (AMBAC Insd)............... 5.200 11/01/27 6,885,320 -------------- 9,547,336 --------------
18 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- SOUTH DAKOTA 1.0% $ 1,455 Rapid City, SD Sales Tax Rev Rfdg (AMBAC Insd).......................................... 5.500% 06/01/12 $ 1,662,934 5,205 South Dakota St Lease Rev Tr Ctf Ser A (FSA Insd).......................................... 6.625 09/01/12 6,432,235 4,000 South Dakota St Lease Rev Tr Ctf Ser A (FSA Insd).......................................... 6.700 09/01/17 5,101,680 -------------- 13,196,849 -------------- TEXAS 12.9% 1,165 Alamo, TX Cmnty College Dist Combined Fee Rfdg (FSA Insd)..................................... 5.000 11/01/22 1,212,660 7,120 Austin, TX Arpt Sys Rev Pr Lien Rfdg (MBIA Insd).......................................... 5.000 11/15/12 7,935,596 2,150 Austin, TX Cft Oblig (MBIA Insd)............... 5.375 09/01/18 2,384,888 2,250 Austin, TX Ctf Oblig (MBIA Insd)............... 5.375 09/01/19 2,481,008 4,455 Austin, TX Hotel Occupancy Tax Rfdg (FSA Insd).......................................... 5.000 11/15/15 4,899,253 4,680 Austin, TX Hotel Occupancy Tax Rfdg (FSA Insd).......................................... 5.000 11/15/16 5,099,328 2,460 Austin, TX Hotel Occupancy Tax Rfdg (FSA Insd).......................................... 5.000 11/15/17 2,663,959 2,585 Austin, TX Hotel Occupancy Tax Rfdg (FSA Insd).......................................... 5.000 11/15/18 2,782,184 2,715 Austin, TX Hotel Occupancy Tax Rfdg (FSA Insd).......................................... 5.000 11/15/19 2,904,208 7,865 Austin, TX Util Sys Rev Rfdg (FSA Insd)........ 5.000 11/15/11 8,591,647 12,500 Austin, TX Util Sys Rev Ser A Rfdg (MBIA Insd).......................................... * 11/15/10 10,085,750 5,000 Brazos Riv Auth, TX Rev Houston Ind Inc Proj Ser C (Variable Rate Coupon) (AMBAC Insd)...... 5.125 05/01/19 5,343,250 2,000 Colorado Riv, TX Muni Wtr Dist Sys Rfdg (AMBAC Insd).......................................... 5.375 01/01/19 2,206,660 1,400 Corpus Christi, TX Util Sys Rev Impt & Rfdg (FSA Insd)..................................... 5.250 07/15/17 1,546,034 15,400 Dallas Cnty, TX Util & Reclamation Dist Ser B Rfdg (AMBAC Insd).............................. 5.875 02/15/29 15,940,848 5,000 El Paso, TX Ctf Oblig (FSA Insd)............... 5.750 08/15/25 5,476,050 4,500 Harris Cnty, TX Toll Rd Sr Lien Rfdg (MBIA Insd).......................................... 5.125 08/15/17 4,896,090 4,605 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)... 5.500 07/01/17 5,185,230 2,000 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)... 5.500 07/01/18 2,238,440 5,000 Houston, TX Hotel Occupancy Convention & Entmt Ser A Rfdg (AMBAC Insd)........................ 5.375 09/01/14 5,679,250 2,000 Houston, TX Pub Impt Ser B Rfdg (FSA Insd)..... 5.500 03/01/18 2,232,060 12,400 Houston, TX Wtr & Swr Sys Rev Cap Apprec Ser A Rfdg (FSA Insd)................................ * 12/01/20 5,533,748 1,790 Laredo, TX Cmnty College Dist Combined Fee Rev Bldg Rfdg (AMBAC Insd)......................... 5.300 08/01/26 1,906,082 4,335 North Harris Cnty, TX Regl Wtr Sr Lien (FGIC Insd).......................................... 5.250 12/15/19 4,761,564 2,220 Raven Hills, TX Higher Ed Corp Cardinal Vlg Llc Lamar Univ A (MBIA Insd)....................... 5.500 08/01/28 2,409,566 1,000 San Antonio, TX Indpt Sch Dist Pub Fac Corp Lease Rev (AMBAC Insd)......................... 5.850 10/15/10 1,109,860 1,730 San Antonio, TX Muni Drain Util (MBIA Insd).... 5.000 02/01/21 1,827,901
See Notes to Financial Statements 19 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 1,750 Tarrant Cnty, TX Hlth Fac Dev Corp Hlth Sys Rev Ser B (Escrowed to Maturity) (FGIC Insd)....... 5.000% 09/01/15 $ 1,953,490 1,060 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA Insd).......................................... 5.250 03/01/18 1,164,770 2,000 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA Insd).......................................... 5.250 03/01/20 2,174,160 10,000 Texas St Tpk Auth Cent TX Tpk First Tier Ser A (AMBAC Insd)................................... 5.500 08/15/39 10,741,900 26,905 Texas St Tpk Auth Dallas Northtwy Rev George Bush Tpk (FGIC Insd)........................... 5.250 01/01/23 28,535,443 -------------- 163,902,877 -------------- UTAH 0.2% 2,140 Murray City, UT Swr & Wtr Rev (AMBAC Insd)..... 5.250 10/01/23 2,311,928 660 Provo, UT Elec Rev 1984 Ser A Rfdg (Escrowed to Maturity) (AMBAC Insd)......................... 10.375 09/15/15 942,071 -------------- 3,253,999 -------------- VIRGINIA 0.1% 1,595 Virginia St Hsg Dev Auth Comwlth Mtg Ser J Subser J-1 (MBIA Insd)......................... 5.200 07/01/19 1,656,009 -------------- WASHINGTON 7.7% 4,115 Chelan Cnty, WA Sch Dist No 246 (FSA Insd)..... 5.000 12/01/21 4,341,819 1,930 Clark Cnty, WA Pub Util Dist No 001 Elec Rev Rfdg (AMBAC Insd).............................. 5.500 01/01/12 2,223,148 2,990 Clark Cnty, WA Pub Util Dist No 001 Wtr Rev (FSA Insd)..................................... 5.125 01/01/20 3,202,619 11,340 Energy Northwest WA Elec Rev Columbia Generating Ser A Rfdg (FSA Insd)............... 5.500 07/01/17 12,618,245 4,040 Energy Northwest WA Elec Rev Columbia Generating Ser F (MBIA Insd)................... 5.250 07/01/16 4,488,036 4,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)................................ 5.500 07/01/17 5,007,240 10,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (XLCA Insd)............................... 5.500 07/01/17 11,294,000 14,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)................................ 5.500 07/01/18 16,105,150 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser B Rfdg (FSA Insd)................................ 6.000 07/01/16 5,841,450 1,365 Energy Northwest WA Wind Proj (AMBAC Insd)..... 5.000 07/01/23 1,420,583 2,335 Grant Cnty, WA Pub Util Dist No 2 Rev Second Ser C Rfdg (AMBAC Insd)........................ 6.000 01/01/17 2,592,410 1,025 Grant Cnty, WA Pub Util Dist No 2 Rev Second Ser C Rfdg (AMBAC Insd)........................ 6.000 01/01/17 1,137,996 350 Pierce Cnty, WA Swr Rev Ser A (Escrowed to Maturity) (MBIA Insd).......................... 9.000 02/01/05 372,838 2,000 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA Insd).......................................... 5.500 03/01/18 2,230,780 4,100 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.000 12/01/21 4,363,671
20 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- WASHINGTON (CONTINUED) $ 2,565 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.500% 12/01/23 $ 2,802,468 145 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.000 12/01/24 150,728 2,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/25 2,261,920 2,420 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/26 2,732,785 3,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.250 09/01/33 3,192,750 1,965 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC Insd).......................................... 5.375 12/01/18 2,175,255 2,075 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC Insd).......................................... 5.375 12/01/19 2,282,811 3,090 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev Ser A Rfdg (AMBAC Insd)............... 5.700 07/01/09 3,409,475 1,600 Washington St Ser R 99A Rfdg (FGIC Insd)....... 5.000 01/01/17 1,708,800 -------------- 97,956,977 -------------- WEST VIRGINIA 0.1% 1,530 West Virginia Econ Dev Auth Lease Rev Correctional Juvenile & Pub-A (MBIA Insd)...... 5.500 06/01/19 1,714,870 -------------- WISCONSIN 1.2% 1,350 Plover, WI Wtr Sys Rev (AMBAC Insd)............ 5.400 12/01/16 1,512,405 1,500 Plover, WI Wtr Sys Rev (AMBAC Insd)............ 5.500 12/01/18 1,683,720 1,270 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)...... 5.250 09/01/14 1,427,798 1,405 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)...... 5.250 09/01/16 1,558,538 3,950 Two Rivs, WI Pub Sch Dist Rfdg (Prerefunded @ 03/01/10) (FSA Insd)........................... 6.000 03/01/18 4,651,678 3,920 University of WI Hosp & Clinics Auth Rev (FSA Insd).......................................... 6.200 04/01/29 4,566,447 -------------- 15,400,586 -------------- WYOMING 0.2% 2,000 Laramie Cnty, WY Hosp Rev Mem Hosp Proj (AMBAC Insd).......................................... 6.700 05/01/12 2,028,340 --------------
See Notes to Financial Statements 21 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- PUERTO RICO 0.7% $ 5,000 Puerto Rico Comwlth Hwy & Tran Sub (FGIC Insd).......................................... 5.250% 07/01/18 $ 5,612,550 3,000 Puerto Rico Indl Tourist Ed Med & Environmental Ctl Fac Hosp Aux (MBIA Insd)................... 6.250 07/01/16 3,166,530 -------------- 8,779,080 -------------- TOTAL LONG-TERM INVESTMENTS 98.1% (Cost $1,155,705,789)....................................................... 1,250,564,867 SHORT-TERM INVESTMENTS 1.8% (Cost $22,400,000).......................................................... 22,400,000 -------------- TOTAL INVESTMENTS 99.9% (Cost $1,178,105,789)....................................................... 1,272,964,867 OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%................................... 1,636,694 -------------- NET ASSETS 100.0%............................................................ $1,274,601,561 ==============
* Zero coupon bond (a) Security purchased on a when-issued or delayed delivery basis. (b) All or a portion of these securities have been physically segregated in connection with open futures contracts. (c) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (d) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 4.71% of net assets. AMBAC--AMBAC Indemnity Corp. BIGI--Bond Investor Guaranty Inc. CIFG--CDC IXIS Financial Guaranty Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. 22 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2004 (Unaudited) ASSETS: Total Investments (Cost $1,178,105,789)..................... $1,272,964,867 Cash........................................................ 84,055 Receivables: Interest.................................................. 16,338,707 Investments Sold.......................................... 6,815,368 Fund Shares Sold.......................................... 580,086 Other....................................................... 244,910 -------------- Total Assets............................................ 1,297,027,993 -------------- LIABILITIES: Payables: Investments Purchased..................................... 17,743,798 Fund Shares Repurchased................................... 1,453,042 Income Distributions...................................... 1,015,155 Distributor and Affiliates................................ 654,547 Investment Advisory Fee................................... 552,931 Variation Margin on Futures............................... 517,375 Trustees' Deferred Compensation and Retirement Plans........ 308,730 Accrued Expenses............................................ 180,854 -------------- Total Liabilities....................................... 22,426,432 -------------- NET ASSETS.................................................. $1,274,601,561 ============== NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $1,175,008,304 Net Unrealized Appreciation................................. 93,443,930 Accumulated Net Realized Gain............................... 4,114,650 Accumulated Undistributed Net Investment Income............. 2,034,677 -------------- NET ASSETS.................................................. $1,274,601,561 ============== MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $1,172,859,904 and 61,198,302 shares of beneficial interest issued and outstanding)............. $ 19.16 Maximum sales charge (4.75%* of offering price)......... .96 -------------- Maximum offering price to public........................ $ 20.12 ============== Class B Shares: Net asset value and offering price per share (Based on net assets of $77,887,581 and 4,069,113 shares of beneficial interest issued and outstanding)............. $ 19.14 ============== Class C Shares: Net asset value and offering price per share (Based on net assets of $23,854,076 and 1,247,128 shares of beneficial interest issued and outstanding)............. $ 19.13 ==============
* On sales of $100,000 or more, the sales charge will be reduced. See Notes to Financial Statements 23 VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................... $31,258,868 ----------- EXPENSES: Investment Advisory Fee..................................... 3,254,304 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $1,437,059, $399,020 and $119,516, respectively)............................................. 1,955,595 Shareholder Services........................................ 410,733 Custody..................................................... 49,056 Legal....................................................... 41,662 Trustees' Fees and Related Expenses......................... 16,956 Other....................................................... 266,089 ----------- Total Expenses.......................................... 5,994,395 Less Credits Earned on Cash Balances.................... 4,273 ----------- Net Expenses............................................ 5,990,122 ----------- NET INVESTMENT INCOME....................................... $25,268,746 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 7,201,459 Futures................................................... (7,821,697) ----------- Net Realized Loss........................................... (620,238) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... $85,171,911 ----------- End of the Period: Investments............................................. 94,859,078 Futures................................................. (1,415,148) ----------- 93,443,930 ----------- Net Unrealized Appreciation During the Period............... 8,272,019 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 7,651,781 =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $32,920,527 ===========
24 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statement of Changes in Net Assets (Unaudited)
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 ------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 25,268,746 $ 52,180,180 Net Realized Gain/Loss................................. (620,238) 20,955,240 Net Unrealized Appreciation/Depreciation During the Period............................................... 8,272,019 (37,035,786) -------------- -------------- Change in Net Assets from Operations................... 32,920,527 36,099,634 -------------- -------------- Distributions from Net Investment Income: Class A Shares....................................... (22,900,564) (47,030,700) Class B Shares....................................... (1,234,929) (2,660,042) Class C Shares....................................... (369,736) (760,360) -------------- -------------- (24,505,229) (50,451,102) -------------- -------------- Distributions from Net Realized Gain: Class A Shares....................................... (13,949,578) (11,285,930) Class B Shares....................................... (936,852) (786,390) Class C Shares....................................... (284,764) (214,972) -------------- -------------- (15,171,194) (12,287,292) -------------- -------------- Total Distributions.................................... (39,676,423) (62,738,394) -------------- -------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (6,755,896) (26,638,760) -------------- -------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold.............................. 39,813,673 323,995,612 Net Asset Value of Shares Issued Through Dividend Reinvestment......................................... 31,154,345 47,057,129 Cost of Shares Repurchased............................. (106,135,212) (381,484,901) -------------- -------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (35,167,194) (10,432,160) -------------- -------------- TOTAL DECREASE IN NET ASSETS........................... (41,923,090) (37,070,920) NET ASSETS: Beginning of the Period................................ 1,316,524,651 1,353,595,571 -------------- -------------- End of the Period (Including accumulated undistributed net investment income of $2,034,677 and $1,271,160, respectively)........................................ $1,274,601,561 $1,316,524,651 ============== ==============
See Notes to Financial Statements 25 VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ------------------------------------------------------- 2004 2003 2002 (a) 2001 2000 1999 --------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD............ $ 19.27 $ 19.65 $ 19.22 $ 18.27 $ 18.08 $ 19.96 -------- -------- -------- -------- -------- -------- Net Investment Income.... .38 .77 .81 .86 .91 .91 Net Realized and Unrealized Gain/Loss... .11 (.23) .87 .98 .17 (1.64) -------- -------- -------- -------- -------- -------- Total from Investment Operations............... .49 .54 1.68 1.84 1.08 (.73) -------- -------- -------- -------- -------- -------- Less: Distributions from Net Investment Income...... .37 .74 .81 .89 .88 .92 Distributions from Net Realized Gain.......... .23 .18 .44 -0- .01 .23 -------- -------- -------- -------- -------- -------- Total Distributions........ .60 .92 1.25 .89 .89 1.15 -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD................... $ 19.16 $ 19.27 $ 19.65 $ 19.22 $ 18.27 $ 18.08 ======== ======== ======== ======== ======== ======== Total Return (b)........... 2.57%* 2.90% 9.28% 10.28% 6.13% -3.80% Net Assets at End of the Period (In millions)..... $1,172.9 $1,209.9 $1,244.3 $1,129.6 $1,086.6 $1,178.3 Ratio of Expenses to Average Net Assets....... .87% .86% .87% .90% .90% .92% Ratio of Net Investment Income to Average Net Assets................... 3.97% 4.02% 4.30% 4.55% 5.10% 4.77% Portfolio Turnover......... 13%* 61% 54% 80% 69% 92%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 4.27% to 4.30%. Per share, ratios and supplemental data for the periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 26 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ------------------------------------------------ 2004 2003 2002 (a) 2001 2000 1999 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $19.24 $19.63 $19.20 $18.26 $18.08 $19.96 ------ ------ ------ ------ ------ ------ Net Investment Income........... .31 .63 .66 .70 .78 .76 Net Realized and Unrealized Gain/Loss..................... .12 (.24) .88 .99 .15 (1.64) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .43 .39 1.54 1.69 .93 (.88) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............. .30 .60 .67 .75 .74 .77 Distributions from Net Realized Gain.......................... .23 .18 .44 -0- .01 .23 ------ ------ ------ ------ ------ ------ Total Distributions............... .53 .78 1.11 .75 .75 1.00 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $19.14 $19.24 $19.63 $19.20 $18.26 $18.08 ====== ====== ====== ====== ====== ====== Total Return (b).................. 2.24%* 2.08% 8.47% 9.42% 5.25% -4.60% Net Assets at End of the Period (In millions)................... $ 77.9 $ 82.6 $ 87.2 $ 49.2 $ 43.0 $ 56.8 Ratio of Expenses to Average Net Assets.......................... 1.63% 1.62% 1.63% 1.69% 1.68% 1.68% Ratio of Net Investment Income to Average Net Assets.............. 3.22% 3.26% 3.53% 3.76% 4.34% 3.99% Portfolio Turnover................ 13%* 61% 54% 80% 69% 92%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 3.50% to 3.53%. Per share, ratios and supplemental data for the periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 27 VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ------------------------------------------------ 2004 2003 2002 (a) 2001 2000 1999 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $19.23 $19.62 $19.19 $18.25 $18.08 $19.95 ------ ------ ------ ------ ------ ------ Net Investment Income........... .31 .63 .67 .69 .79 .76 Net Realized and Unrealized Gain/Loss..................... .12 (.24) .87 1.00 .13 (1.63) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .43 .39 1.54 1.69 .92 (.87) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............. .30 .60 .67 .75 .74 .77 Distributions from Net Realized Gain.......................... .23 .18 .44 -0- .01 .23 ------ ------ ------ ------ ------ ------ Total Distributions............... .53 .78 1.11 .75 .75 1.00 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $19.13 $19.23 $19.62 $19.19 $18.25 $18.08 ====== ====== ====== ====== ====== ====== Total Return (b).................. 2.24%* 2.08% 8.48% 9.42% 5.19% -4.55% Net Assets at End of the Period (In millions)................... $ 23.9 $ 24.1 $ 22.1 $ 11.2 $ 5.4 $ 8.3 Ratio of Expenses to Average Net Assets.......................... 1.63% 1.62% 1.63% 1.65% 1.68% 1.68% Ratio of Net Investment Income to Average Net Assets.............. 3.21% 3.25% 3.53% 3.80% 4.35% 3.99% Portfolio Turnover................ 13%* 61% 54% 80% 69% 92%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 3.50% to 3.53%. Per share, ratios and supplemental data for the periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 28 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Insured Tax Free Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors a high level of current income exempt from federal income taxes, with liquidity and safety of principal, primarily through investment in a diversified portfolio of insured municipal securities. The Fund commenced investment operations on December 14, 1984. The distribution of the Fund's Class B and Class C Shares commenced on May 3, 1993 and August 13, 1993, respectively. Effective November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2004, the Fund had $17,743,798 of when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute 29 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. At March 31, 2004, the cost and related gross unrealized appreciation and depreciation were as follows: Cost of investments for tax purposes........................ $1,177,123,923 ============== Gross tax unrealized appreciation........................... $ 96,503,372 Gross tax unrealized depreciation........................... (662,428) -------------- Net tax unrealized appreciation on investments.............. $ 95,840,944 ==============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains and a portion of futures gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2003 was as follows:
2003 Distributions paid from: Ordinary Income........................................... $ 4,974,664 Long-term capital gain.................................... 7,723,917 ----------- $12,698,581 ===========
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 264,854 Undistributed long-term capital gain........................ 11,838,027
F. INSURANCE EXPENSES The Fund typically invests in insured bonds. Any portfolio securities not specifically covered by a primary insurance policy are insured secondarily through the Fund's portfolio insurance policy. Insurance premiums are based on the daily balances of uninsured bonds in the portfolio of investments and are charged to expense on an accrual basis. The insurance policy guarantees the timely payment of principal and interest on the securities in the Fund's portfolio. G. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's custody fee was reduced by $4,273 as a result of credits earned on cash balances. 30 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .525% Next $500 million........................................... .500% Next $500 million........................................... .475% Over $1.5 billion........................................... .450%
For the six months ended March 31, 2004, the Fund recognized expenses of approximately $24,800 representing legal expenses provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $70,300 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $322,100, representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $223,109 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2004. Appreciation/ depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligations and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 31 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2004, capital aggregated $1,074,997,858, $75,986,852 and $24,023,594 for Classes A, B and C, respectively. For the six months ended March 31, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,767,076 $ 33,981,788 Class B................................................... 167,932 3,223,624 Class C................................................... 136,030 2,608,261 ---------- ------------- Total Sales................................................. 2,071,038 $ 39,813,673 ========== ============= Dividend Reinvestment: Class A................................................... 1,524,654 $ 29,243,679 Class B................................................... 75,432 1,444,607 Class C................................................... 24,351 466,059 ---------- ------------- Total Dividend Reinvestment................................. 1,624,437 $ 31,154,345 ========== ============= Repurchases: Class A................................................... (4,894,554) $ (94,024,893) Class B................................................... (464,908) (8,926,077) Class C................................................... (165,732) (3,184,242) ---------- ------------- Total Repurchases........................................... (5,525,194) $(106,135,212) ========== =============
At September 30, 2003, capital aggregated $1,105,797,284, $80,244,698 and $24,133,516 for Classes A, B and C, respectively. For the year ended September 30, 2003, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 15,358,941 $ 294,205,218 Class B................................................... 997,166 19,179,849 Class C................................................... 552,551 10,610,545 ----------- ------------- Total Sales................................................. 16,908,658 $ 323,995,612 =========== ============= Dividend Reinvestment: Class A................................................... 2,306,810 $ 44,213,876 Class B................................................... 112,868 2,160,427 Class C................................................... 35,696 682,826 ----------- ------------- Total Dividend Reinvestment................................. 2,455,374 $ 47,057,129 =========== ============= Repurchases: Class A................................................... (18,180,737) $(348,581,095) Class B................................................... (1,260,175) (24,097,852) Class C................................................... (461,820) (8,805,954) ----------- ------------- Total Repurchases........................................... (19,902,732) $(381,484,901) =========== =============
32 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares seven years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2004 and the year ended September 30, 2003, 6,626 and 177,637 Class B Shares converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2004 and the year ended September 30, 2003, no Class C Shares converted to Class A Shares. Class B and Class C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be imposed on most redemptions made within six years of the purchase for Class B and one year of the purchase for Class C as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 4.00% 1.00% Second...................................................... 3.75% None Third....................................................... 3.50% None Fourth...................................................... 2.50% None Fifth....................................................... 1.50% None Sixth....................................................... 1.00% None Seventh and Thereafter...................................... None None
For the six months ended March 31, 2004, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $81,300 and CDSC on redeemed shares of approximately $88,600. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $167,874,434 and $220,796,086, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio and to manage 33 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued the portfolio's effective yield, maturity and duration. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Summarized below are the specific types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Notes and typically closes the contract prior to the delivery date. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts, for the six months ended March 31, 2004, were as follows:
CONTRACTS Outstanding at September 30, 2003........................... 1,750 Futures Opened.............................................. 2,245 Futures Closed.............................................. (2,766) ------ Outstanding at March 31, 2004............................... 1,229 ======
The futures contracts outstanding as of March 31, 2004, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 10-Year Futures June 2004 (Current Notional Value of $115,406 per contract)......... 217 $ (316,232) U.S. Treasury Notes 5-Year Futures June 2004 (Current Notional Value of $113,563 per contract)......... 1,012 (1,098,916) ----- ----------- 1,229 $(1,415,148) ===== ===========
B. INVERSE FLOATING RATE SECURITIES An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specified factor. As the floating rate rises, the coupon is reduced. Conversely as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the 34 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. 6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and 1.00% each of Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $2,125,000 and $65,400 for Class B and Class C Shares, respectively. This amount may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2004, are payments retained by Van Kampen of approximately $433,500 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $52,100. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, certain officers of such affiliates and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the named investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser, certain affiliates of the Adviser and certain investment companies advised by the Adviser or its affiliates are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the Van Kampen funds; the funds, including the Fund, are also named as nominal defendants. The complaint in the derivative action alleges that defendants gave a proprietary sales force economic incentives to promote the sale of proprietary mutual funds and that they improperly failed to disclose these economic incentives. The complaint also alleges that the Van Kampen funds paid 35 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued excessive commissions to Morgan Stanley DW Inc. in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the Van Kampen funds, rescission of the management contracts for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary damages. This complaint will be coordinated with the consolidated complaint. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 36 VAN KAMPEN INSURED TAX FREE INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1173 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 37 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 32, 332, 532 TFIN SAR 5/04 RN04-00414P-Y03/04 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Strategic Municipal Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2004. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. Income may subject certain individuals to the federal Alternative Minimum Tax (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/04
A SHARES B SHARES C SHARES since 06/28/85 since 04/30/93 since 08/13/93 - ------------------------------------------------------------------------------------------ W/MAX. W/MAX. W/MAX. 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 6.59% 6.32% 4.64% 4.64% 4.16% 4.16% 10-year 5.09 4.58 4.51 4.51 4.36 4.36 5-year 3.32 2.31 2.53 2.28 2.67 2.67 1-year 7.27 2.13 6.46 2.46 6.49 5.49 6-month 3.61 -1.31 3.22 -0.78 3.27 2.27 - ------------------------------------------------------------------------------------------ SEC Yield 5.15% 4.65% 4.60%
Past performance is no guarantee of future results and current performance may be lower or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit vankampen.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year five), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C shares. The since-inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares seven years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004 Van Kampen Strategic Municipal Income Fund is managed by the adviser's Municipal Fixed Income team. Members of the team include Wayne D. Godlin and Dennis S. Pietrzak, Executive Directors, and James D. Phillips, Vice President.(1) MARKET CONDITIONS Economic growth continued to be positive throughout the reporting period. Despite this growth, however, the economy failed to produce a significant increase in job creation and inflation remained low, which led the Fed to maintain its bias toward keeping interest rates low. As a result, yields remained low across the entire municipal yield curve. Early in the reporting period, the market had built-in expectations of Fed tightening (increasing interest rates) in early 2004. When it became apparent that higher rates were unlikely to materialize as anticipated, market consensus reversed, bonds rallied, and credit spreads (the incremental yield difference between lower- and higher-rated bonds) in the municipal market began to tighten. The rally continued until March, when the municipal market started to lose momentum and give up some of its prior gains. The supply of new municipal bond issuance continued to be very high during the reporting period. Many municipalities sought to take advantage of historically low interest rates--either by issuing new debt or by refinancing existing debt that carried higher rates. At the same time, demand for municipal bonds grew as investors searching for yield were attracted to the bonds' potential tax advantages. The high-yield segment of the municipal market generally outperformed higher-rated bonds, particularly in the latter part of the period, as investors seemed willing to take on greater credit risk in exchange for higher yields. PERFORMANCE ANALYSIS During the six-month period ended March 31, the fund returned 3.61 percent (Class A shares, unadjusted for sales charge), outpacing its benchmark, the Lehman Brothers Municipal Bond Index. (See table below.) TOTAL RETURN FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2004
- ------------------------------------------------------------------ LEHMAN BROTHERS MUNICIPAL CLASS A CLASS B CLASS C BOND INDEX 3.61% 3.22% 3.27% 3.12% - ------------------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information. (1)Team members may change without notice at any time. 2 The portfolio's structure is commonly referred to as a "barbell" structure-- where holdings are more heavily weighted in the high- and low-grade sectors of the credit spectrum. This type of structure offers the dual benefits of potentially higher yields (from the lower-rated portion) and added balance (from the lower-risk/higher-rated portion). In the first three months of the period, the portfolio's holdings in higher-rated bonds drove the fund's positive performance. This outperformance was due in part to a decline in the overall supply of higher-rated bonds in the marketplace, which contributed to a rally in this sector. In the last three months, however, tightening credit spreads led to stronger relative performance for high-yield bonds. The fund enjoyed gains as a result, due to its greater concentration in this segment of the market during the period. As of March 31, 68 percent of the portfolio's long-term holdings were in high-yield bonds, down slightly from 74 percent as of September 30, 2003. Within high-yield, our emphasis on health-care and continuing-care bonds--the fund's top two sectors--was particularly additive to performance due to spread tightening in these sectors. Holdings in tax-district bonds also helped boost fund returns. We continued to focus investments in these and other essential- services sectors of the municipal market because they tend to be less cyclical and therefore, less affected by changing economic conditions. We continued to keep the portfolio highly diversified, and maintained its lower duration (sensitivity to interest-rate changes) to help minimize interest-rate risk. Keeping the fund's duration in the target range proved more challenging during the reporting period; with interest rates so low, it was increasingly difficult to find higher-coupon bonds to add to the portfolio, which have a lower duration than low-coupon bonds. A lower duration could serve the fund well if interest rates do begin to rise. 3 Looking ahead, we believe demand for municipal bonds should continue to be strong--especially if the economy continues to improve and interest rates remain low. As always, we will pursue our disciplined investment approach, monitoring the markets carefully for opportunities to add value to the portfolio. RATINGS ALLOCATION AS OF 3/31/04 AAA 12.2% AA 5.3 A 7.2 BBB 7.6 BB 2.5 B 4.7 CC 0.1 Non-Rated 60.4
TOP 5 SECTORS AS OF 3/31/04 TOP 5 STATES AS OF 3/31/04 Continuing Care 17.7% Illinois 9.9% Health Care 15.5 Florida 8.9 Industrial Revenue 13.7 Texas 8.8 Tax District 10.9 Pennsylvania 8.5 General Purpose 7.6 New York 6.8
Subject to change daily. All percentages are as a percentage of long-term investments. Provided for informational purposes only and should not be deemed as a recommendation to buy securities in the sectors shown above. Ratings allocations are based upon ratings as issued by Standard and Poor's. Ratings allocation percentages are as a percentage of corporate-debt obligations. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MUNICIPAL BONDS 93.7% ALABAMA 1.4% $ 1,000 Alabama Drinking Wtr Fin Auth Revolving Fd Ln Ser C (AMBAC Insd)...................... 5.750% 08/15/18 $ 1,135,680 2,000 Alabama Drinking Wtr Fin Auth Revolving Fd Ln Ser C (AMBAC Insd)...................... 5.375 08/15/23 2,156,860 2,000 Alabama Wtr Pollutn Ctl Auth (AMBAC Insd)...................................... 5.750 08/15/18 2,258,340 1,500 Colbert Cnty Northwest Auth Hlth Care Facs....................................... 5.750 06/01/27 1,478,160 2,500 Huntsville/Carlton Cove, AL Carlton Cove Inc Proj Ser A............................. 7.000 11/15/17 1,812,500 3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev Mobile Energy Svc Co Proj Rfdg (a) (b)........................................ 6.950 01/01/20 21 1,395 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem Hosp Ser A............................. 5.600 11/01/16 1,365,007 1,750 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem Hosp Ser A............................. 5.650 11/01/22 1,651,562 ------------ 11,858,130 ------------ ALASKA 0.7% 1,630 Alaska Indl Dev & Expt Auth Williams Lynxs AK Cargoport (Acquired 05/17/01, Cost $1,630,000) (c)............................ 7.800 05/01/14 1,683,774 4,000 Juneau, AK City & Borough Rev Saint Anns Care Ctr Proj.............................. 6.875 12/01/25 4,017,200 ------------ 5,700,974 ------------ ARIZONA 3.3% 2,000 Arizona Hlth Fac Auth Hosp John C Lincoln Hlth Network............................... 6.375 12/01/37 2,118,140 1,000 Arizona Hlth Fac Auth Rev Terraces Proj Ser A.......................................... 7.500 11/15/23 1,015,840 1,250 Arizona Hlth Fac Auth Rev Terraces Proj Ser A.......................................... 7.750 11/15/33 1,280,025 1,480 Cochise Cnty, AZ Indl Dev Sierra Vista Cmnty Hosp Ser A Rfdg...................... 6.750 12/01/26 1,524,548 1,000 Flagstaff, AZ Indl Dev Auth Rev Sr Living Cmnty Northn AZ Proj....................... 7.500 03/01/35 1,075,050 500 Flagstaff, AZ Indl Dev Auth Rev Sr Living Cmnty Northn Cmnty Proj.................... 6.300 09/01/38 481,110 1,000 Maricopa Cnty, AZ Indl Dev Auth AZ Charter Sch Proj 1 Ser A........................... 6.625 07/01/20 1,027,320 1,000 Maricopa Cnty, AZ Indl Dev Auth Horizon Cmnty Learning Ctr Proj 1 Ser A............ 7.125 06/01/10 1,031,470 4,000 Maricopa Cnty, AZ Indl Dev Auth Multi-Family Hsg Rev Natl Hlth Fac II Proj Ser B (Acquired 01/15/98, Cost $4,000,000) (c)........................................ 6.625 07/01/33 3,074,160 2,605 Maricopa Cnty, AZ Indl Dev Christian Care Mesa Inc Proj Ser A........................ 7.750 04/01/15 2,733,296
6 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ARIZONA (CONTINUED) $ 2,000 Maricopa Cnty, AZ Indl Dev Christian Care Mesa Inc Proj Ser A........................ 7.875% 04/01/27 $ 2,072,780 1,500 Peoria, AZ Indl Dev Auth Rev Sierra Winds Life Ser A Rfdg............................ 6.375 08/15/29 1,451,400 2,500 Phoenix, AZ Indl Dev Auth Mtg Christian Care Apt Proj Ser A Rfdg................... 6.500 01/01/26 2,573,700 1,355 Pima Cnty, AZ Indl Dev Auth Dev Radisson City Ctr Proj Rfdg (Acquired 03/28/02, Cost $1,355,000) (c)............................ 7.000 12/02/12 1,344,431 800 Pima Cnty, AZ Indl Dev Auth Fac Skyline Tech High Sch Proj......................... 7.500 02/01/34 798,456 1,000 Pima Cnty, AZ Indl Dev Auth Rev La Posada at Park Ctr Ser A.......................... 7.000 05/15/27 1,019,470 520 Pima Cnty, AZ Indl Dev Auth Ser A.......... 7.250 11/15/18 511,675 500 Pima Cnty, AZ Indl Dev Auth Ser A.......... 8.250 11/15/22 514,175 1,110 Red Hawk Canyon Cmnty Fac Dist No 2 AZ Dist Assmt Rev.................................. 6.500 12/01/12 1,188,366 2,150 Tucson, AZ Multi-Family Rev Hsg Catalina Asstd Living Ser A......................... 6.500 07/01/31 1,910,597 ------------ 28,746,009 ------------ CALIFORNIA 3.0% 1,000 Abag Fin Auth Nonprofit Corp CA American Baptist Homes Ser A Rfdg................... 5.850 10/01/27 964,050 2,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)...................................... 5.500 05/01/16 2,261,500 1,000 California Statewide Cmnty Dev Auth Elder Care Alliance Ser A........................ 8.250 11/15/32 1,004,050 975 California Statewide Cmnty Dev Auth Multi- Family Rev Hsg Heritage Pointe Sr Apt Ser QQ (Acquired 02/19/02, Cost $972,563) (c)........................................ 7.500 10/01/26 955,324 1,000 California Statewide Cmnty Dev Auth San Francisco Art Institute (Acquired 06/28/02, Cost $1,000,000) (c)....................... 7.375 04/01/32 1,011,260 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd)..... * 09/01/17 2,657,400 2,300 Foothill/Eastern Tran Corridor Agy CA Toll Rd Rev (MBIA Insd)......................... * 01/15/18 1,130,519 1,460 Healdsburg, CA Ctf Part Nuestro Hosp Inc (Acquired 11/13/98, Cost $1,437,739) (a) (b) (c).................... 6.375 11/01/28 58,400 1,750 Huntington Beach, CA Cmnty No 2003 1 Huntington Ctr............................. 5.800 09/01/23 1,750,000 920 Indio, CA Pub Fin Auth Rev Tax Increment... 6.500 08/15/27 961,014 1,900 Lake Elsinore, CA Pub Fin Auth Loc Agy Rev Ser F...................................... 7.100 09/01/20 2,034,558 1,750 Los Angeles, CA Regl Arpt Impt Corp Lease Rev Fac Sublease LA Intl Ser A-1 Rfdg...... 7.125 12/01/24 1,487,552
See Notes to Financial Statements 7 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $ 4,075 Los Angeles, CA Regl Arpt Impt Corp Lease Rev Ser C.................................. 7.500% 12/01/24 $ 3,463,668 1,455 Millbrae, CA Residential Fac Rev Magnolia of Millbrae Proj Ser A..................... 7.375 09/01/27 1,492,801 1,000 Perris, CA Cmnty Fac Dist Spl Tax No 01-2 Ser A...................................... 6.375 09/01/32 1,020,520 1,240 Simi Vly, CA Cmnty Dev Agy Coml Sycamore Plaza II Rfdg (Acquired 07/28/98, Cost $1,240,000) (c)............................ 6.000 09/01/12 1,310,990 1,965 Vallejo, CA Ctf Part Touro Univ............ 7.250 06/01/16 2,069,361 ------------ 25,632,967 ------------ COLORADO 2.0% 1,000 Bromley Pk Met Dist CO No 2 Ser B.......... 8.050 12/01/32 1,022,980 975 Colorado Ed & Cultural Fac Charter Sch Frontier Academy........................... 7.250 06/01/20 1,025,924 2,000 Colorado Hlth Fac Auth Rev Baptist Home Assn Ser A................................. 6.375 08/15/24 1,631,080 1,060 Colorado Hlth Fac Auth Rev Christian Living Campus Proj................................ 7.050 01/01/19 1,073,738 6,200 Colorado Hlth Fac Auth Rev Christian Living Campus Proj (Prerefunded @ 01/01/05)....... 9.000 01/01/25 6,666,116 2,500 Elk Vly, CO Pub Impt Fee Ser A............. 7.300 09/01/22 2,615,825 710 Lafayette, CO Indl Dev Rev Rocky Mtn Instr Proj Ser A................................. 6.750 10/01/14 417,523 1,985 Lafayette, CO Indl Dev Rev Rocky Mtn Instr Proj Ser A................................. 7.000 10/01/18 1,163,984 1,774 Skyland Metro Dist CO Gunnison Cnty Rfdg... 6.750 12/01/22 1,775,845 ------------ 17,393,015 ------------ CONNECTICUT 0.4% 1,500 Connecticut St Dev Auth Indl Afco Cargo Bdl LLC Proj................................... 8.000 04/01/30 1,579,125 2,000 Mohegan Tribe Indians CT Pub Impt Priority Dist (Acquired 09/27/01, Cost $1,956,551) (c)........................................ 6.250 01/01/31 2,132,800 ------------ 3,711,925 ------------ DELAWARE 0.1% 1,120 Wilmington, DE Multi-Family Rent Rev Hsg Electra Arms Sr Assoc Proj................. 6.250 06/01/28 988,400 ------------ DISTRICT OF COLUMBIA 0.1% 1,000 District of Columbia Rev Methodist Home Issue...................................... 6.000 01/01/29 903,610 85 District of Columbia Ser A-1 (Escrowed to Maturity) (MBIA Insd)...................... 6.500 06/01/10 102,915 ------------ 1,006,525 ------------
8 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA 8.3% $ 3,590 Escambia Cnty, FL Rev ICF/MR Pensacola Care Dev Ctr.................................... 10.250% 07/01/11 $ 3,607,735 1,520 Escambia Cnty, FL Rev ICF/MR Pensacola Care Dev Ctr Ser A.............................. 10.250 07/01/11 1,527,509 80 Fishhawk Cmnty Dev Dist of FL Spl Assmt Rev........................................ 6.650 05/01/07 80,868 1,390 Fishhawk Cmnty Dev Dist of FL Spl Assmt Rev........................................ 7.625 05/01/18 1,481,921 3,705 Florida Hsg Fin Corp Rev Hsg Beacon Hill Apt Ser C.................................. 6.610 07/01/38 3,517,601 7,210 Florida Hsg Fin Corp Rev Hsg Cypress Trace Apt Ser G.................................. 6.600 07/01/38 6,806,600 4,905 Florida Hsg Fin Corp Rev Hsg Westchase Apt Ser B...................................... 6.610 07/01/38 4,365,058 320 Heritage Harbor Cmnty Dev Dist FL Rev Recntl..................................... 7.750 05/01/23 305,158 850 Heritage Harbor Cmnty Dev Dist FL Rev Spl Assmt Ser A................................ 6.700 05/01/19 878,492 1,500 Hillsborough Cnty, FL Hsg Fin Hsg Clipper Cove Apt Proj Ser A........................ 7.375 07/01/40 1,474,140 815 Lake Saint Charles, FL Cmnty Dev Dist Spl Assmt Rev.................................. 7.875 05/01/17 848,513 2,000 Lee Cnty, FL Indl Dev Auth Hlthcare Fac Rev Cypress Cove Hlthpk Ser A.................. 6.750 10/01/32 2,051,400 3,550 Leon Cnty, FL Ed Fac Auth Rev Southgate Residence Hall Ser A Rfdg.................. 6.750 09/01/28 3,285,134 1,295 Lexington Cmnty Dev Dist FL................ 6.125 05/01/34 1,311,550 250 Marshall Creek Cmnty Dev FL Spl Assmt Ser B.......................................... 6.750 05/01/07 252,290 2,500 Meadow Woods Cmnty Dev Dist FL Ser A....... 6.050 05/01/35 2,527,000 1,325 Miromar Lakes Cmnty Dev Dist Ser B......... 7.250 05/01/12 1,404,977 950 Northern Palm Beach Cnty Dist FL Impt Wtr Ctl & Impt Unit Dev No 16 Rfdg............. 7.500 08/01/24 1,020,528 2,050 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg.................. 8.625 07/01/20 2,145,468 2,250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg.................. 8.750 07/01/26 2,327,512 1,560 Orange Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys......................... 5.875 11/15/11 1,784,765 1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys......................... 6.375 11/15/20 1,106,170 2,000 Orange Cnty, FL Hlth Fac Auth Rev Westminster Cmnty Care..................... 6.600 04/01/24 1,569,860 2,340 Pinellas Cnty, FL Ed Fac Auth Rev College Harbor Proj Ser A.......................... 8.250 12/01/21 2,441,252
See Notes to Financial Statements 9 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 1,685 Pinellas Cnty, FL Ed Fac Auth Rev College Harbor Proj Ser A.......................... 8.500% 12/01/28 $ 1,764,920 3,000 Pinellas Cnty, FL Hlth Fac Auth Oaks of Clearwater Proj............................ 6.250 06/01/34 3,016,950 990 Saddlebrook, FL Cmnty Ser A................ 6.900 05/01/33 1,045,371 2,000 Saint John's Cnty, FL Indl Dev Auth Hlthcare Rev Bayview Proj Ser A............ 7.100 10/01/26 2,010,200 6,000 Sarasota Cnty, FL Hlth Fac Auth Hlth Fac Sunnyside Pptys............................ 6.700 07/01/25 3,999,060 2,015 Silver Palms Cmnty Dev Dist (d)............ 5.900 05/01/34 2,002,245 440 Stoneybrook West Cmnty Dev Dist FL Spl Assmt Rev Ser B............................ 6.450 05/01/10 448,928 19,341 Sun N Lake of Sebring, FL Impt Dist Spl Assmt Ser A (Acquired 12/08/89, Cost $19,331,366) (a) (c) (e)................... 10.000 12/15/11 4,305,420 680 Tampa Palms, FL Open Space & Trans Cmnty Dev Dist Rev Cap Impt Area 7 Proj.......... 8.500 05/01/17 695,082 342 Tara Cmnty Dev Dist 1 FL Cap Impt Rev Ser B (Acquired 08/03/00, Cost $342,000) (c)..... 6.750 05/01/10 349,739 1,787 University Square Cmnty Dev Dist FL Cap Impt Rev (Acquired 10/07/99, Cost $1,785,270) (c)............................ 6.750 05/01/20 1,893,380 74 Vista Lakes Cmnty Dev Dist FL Cap Impt Rev Ser B...................................... 6.350 05/01/05 74,290 2,000 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj Rfdg (Prerefunded @ 11/01/06)......... 7.625 11/01/26 2,335,380 ------------ 72,062,466 ------------ GEORGIA 2.1% 2,000 Atlanta, GA Tax Alloc Atlantic Sta Proj.... 7.750 12/01/14 2,100,580 2,400 Atlanta, GA Urban Residential Fin Auth Multi-Family Rev John Eagan Proj Ser A..... 6.750 07/01/30 2,339,256 2,750 De Kalb Cnty, GA Residential Care Fac Kings Bridge Ser A............................... 8.250 07/01/26 2,882,852 4,000 Fulton Cnty, GA Hsg Auth Multi-Family Hsg Rev Azalea Manor Proj Ser A (Acquired 02/18/98, Cost $4,000,000) (c)............. 6.500 02/01/28 2,920,000 1,800 Fulton Cnty, GA Residential Care Canterbury Court Proj Ser A........................... 6.000 02/15/22 1,791,846 2,000 Fulton Cnty, GA Residential Care Sr Lien RHA Asstd Living Ser A..................... 7.000 07/01/29 1,964,860 1,000 Private Colleges & Univ Auth GA Mercer Hsg Corp Proj Ser A............................ 6.000 06/01/21 1,043,470 2,930 Renaissance on Peachtree Unit Invt Tr Ctf GA Custody Ctf............................. 12.374 10/01/25 3,376,268 ------------ 18,419,132 ------------
10 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- HAWAII 0.9% $ 3,000 Hawaii St Dept Budget & Fin Spl Purp Rev Kahala Nui Proj Ser A...................... 8.000% 11/15/33 $ 3,049,470 1,820 Hawaii St Dept Trans Spl Fac Rev Continental Airl Inc....................... 5.625 11/15/27 1,330,930 2,825 Kuakini, HI Hlth Sys Spl Ser A............. 6.375 07/01/32 2,946,927 ------------ 7,327,327 ------------ IDAHO 0.1% 1,000 Idaho Hlth Fac Auth Rev Vly Vista Care Ser A Rfdg..................................... 7.875 11/15/29 979,930 ------------ ILLINOIS 9.3% 2,500 Bolingbrook, IL Cap Apprec Ser B (MBIA Insd)...................................... * 01/01/29 644,625 1,993 Bolingbrook, IL Spl Svc Area No 01-1....... 7.375 07/01/31 2,147,956 1,500 Bolingbrook, IL Spl Svc Area No 1 Spl Tax Augusta Vlg Proj (Acquired 11/13/02, Cost $1,500,000) (c)............................ 6.750 03/01/32 1,566,540 1,910 Bolingbrook, IL Spl Svc Area No 3 Lakewood Ridge Proj................................. 7.050 03/01/31 2,040,682 992 Cary, IL Spl Tax Svc Area No 1 Cambridge Ser A...................................... 7.625 03/01/30 1,085,466 3,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (f)............................ 0/5.700 01/01/25 2,904,540 7,750 Chicago, IL O'Hare Intl Arpt Rev RR II R 239-1 (Variable Rate Coupon) (FSA Insd) (Acquired 08/18/03, Cost $8,446,825) (c)... 10.370 01/01/19 9,543,117 3,600 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airl Inc Proj Ser B Rfdg (a) (b).... 6.100 11/01/35 1,080,000 5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.500 01/01/38 5,351,450 4,000 Chicago, IL Spl Assmt Lakeshore East Proj....................................... 6.625 12/01/22 4,036,040 880 Chicago, IL Tax Increment Alloc Read Dunning Ser B (ACA Insd)................... 7.250 01/01/14 965,730 2,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A........................... 6.500 12/01/05 2,126,640 3,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A (ACA Insd)................ 6.500 12/01/06 3,335,610 1,925 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A (ACA Insd)................ 6.500 12/01/08 2,222,701 1,000 Clay Cnty, IL Hosp Rev..................... 5.900 12/01/28 941,710 1,295 Gilberts, IL Spl Svc Area No 9 Spl Tax Big Timber Proj................................ 7.375 03/01/11 1,377,569 1,245 Gilberts, IL Spl Svc Area No 9 Spl Tax Big Timber Proj................................ 7.750 03/01/27 1,366,599 1,500 Godfrey, IL Rev United Methodist Vlg Ser A.......................................... 5.875 11/15/29 1,234,350 2,700 Hoopeston, IL Hosp Cap Impt Rev Hoopeston Cmnty Mem Hosp Rfdg........................ 6.550 11/15/29 2,507,625
See Notes to Financial Statements 11 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 1,810 Huntley, IL Increment Alloc Rev Huntley Redev Proj Ser A........................... 8.500% 12/01/15 $ 1,925,351 253 Huntley, IL Spl Svc Area No 10 Spl Tax Ser A.......................................... 6.250 03/01/09 257,200 2,621 Huntley, IL Spl Svc Area No 10 Spl Tax Ser A.......................................... 6.500 03/01/29 2,687,442 1,405 Illinois Dev Fin Auth Rev Cmnty Fac Clinic Altgeld Proj............................... 8.000 11/15/16 1,164,773 1,000 Illinois Hlth Fac Auth Rev Cent Baptist Home Proj.................................. 7.125 11/15/29 975,210 2,500 Illinois Hlth Fac Auth Rev Decatur Mem Hosp....................................... 5.750 10/01/24 2,618,450 3,000 Illinois Hlth Fac Auth Rev Fairview Oblig Group Ser A Rfdg........................... 7.400 08/15/23 3,011,790 1,000 Illinois Hlth Fac Auth Rev Lifelink Corp Oblig Group Ser B (Prerefunded @ 02/15/05).................................. 8.000 02/15/25 1,059,390 650 Illinois Hlth Fac Auth Rev Loyola Univ Hlth Sys Ser A.................................. 6.000 07/01/21 682,415 1,200 Illinois Hlth Fac Auth Rev Lutheran Sr Ministries Oblig Ser A..................... 7.375 08/15/31 1,209,516 1,500 Illinois Hlth Fac Auth Rev Peace Mem Ministries Proj (Prerefunded @ 08/15/06)... 7.500 08/15/26 1,721,100 1,545 Illinois Hlth Fac Auth Rev Proctor Cmnty Hosp Proj.................................. 7.500 01/01/11 1,545,973 250 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.200 08/15/23 252,910 1,125 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.400 08/15/33 1,140,469 700 Illinois Hlth Fac Auth Rev Silver Cross Hosp & Med Rfdg............................ 5.500 08/15/19 724,143 2,375 Lake Cnty, IL Fst Presv Dist Ld Acquisition & Dev...................................... 5.750 12/15/16 2,778,512 675 Lake Cnty, IL Fst Presv Dist Ld Acquisition & Dev...................................... 5.750 12/15/17 787,090 80 Lake, Cook, Kane & McHenry Cntys, IL Cmnty Unit Sch Dist No 22 (FGIC Insd)............ 5.750 12/01/19 91,351 1,233 Montgomery, IL Spl Assmt Impt Lakewood Creek Proj................................. 7.750 03/01/30 1,375,559 1,800 Peoria, IL Spl Tax Weaverridge Spl Svc Area....................................... 8.050 02/01/17 1,926,270 2,000 Plano, IL Spl Svc Area No 1 Lakewood Springs Proj Ser A......................... 6.200 03/01/34 2,000,700 2,095 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000 06/01/17 2,921,079 960 Sterling, IL Rev Hoosier Care Proj Ser A... 7.125 06/01/34 889,306 ------------ 80,224,949 ------------ INDIANA 1.5% 825 Crawfordsville, IN Redev Cmnty Redev Dist Tax Increment Rev (Acquired 10/15/97, Cost $825,000) (c).............................. 7.000 02/01/12 843,661 1,925 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj Ser A................................. 7.125 06/01/34 1,785,129
12 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- INDIANA (CONTINUED) $ 5,000 Indiana Hlth Fac Hosp Rev Cmnty Fndtn Northwest IN Ser A......................... 6.000% 03/01/34 $ 4,965,250 3,000 Indianapolis, IN Arpt Auth Rev Spl Fac Fed Express Corp Proj.......................... 7.100 01/15/17 3,110,400 2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt......................................... 6.375 11/01/29 2,119,660 ------------ 12,824,100 ------------ IOWA 0.5% 2,000 Estherville, IA Hosp Rev Avera Holy Family Proj....................................... 6.250 07/01/26 2,148,960 2,000 Iowa Fin Auth Hlth Care Facs Care Initiatives Proj Rfdg...................... 9.250 07/01/25 2,382,280 ------------ 4,531,240 ------------ KANSAS 0.8% 955 Lawrence, KS Coml Dev Rev Holiday Inn Sr Ser A Rfdg................................. 8.000 07/01/16 893,603 1,000 Lenexa, KS Hlthcare Fac Rev Lakeview Vlg Inc Ser B.................................. 6.250 05/15/26 1,012,730 960 Manhattan, KS Coml Dev Rev Holiday Inn Sr Ser A Rfdg................................. 8.000 07/01/16 898,282 2,000 Olathe, KS Sr Living Fac Rev Aberdeen Vlg Inc Ser A.................................. 8.000 05/15/30 2,198,720 1,500 Overland Pk, KS Dev Corp Rev First Tier Overland Park Ser A........................ 7.375 01/01/32 1,512,660 ------------ 6,515,995 ------------ KENTUCKY 0.4% 1,000 Kenton Cnty, KY Arpt Brd Spl Fac Rev Mesaba Aviation Inc Proj Ser A.................... 6.700 07/01/29 800,960 3,000 Newport, KY Pub Pptys Corp Rev First Mtg Pub Pkg & Plaza Ser A 1.................... 8.500 01/01/27 2,924,670 ------------ 3,725,630 ------------ LOUISIANA 1.0% 2,135 Louisiana Hsg Fin Agy Rev Multi-Family Hsg Plantation Ser A........................... 7.125 01/01/28 2,098,705 2,000 Louisiana Loc Govt Environment Fac Hlthcare Saint James Place Ser A Rfdg............... 8.000 11/01/29 1,722,960 1,000 Louisiana Pub Fac Auth Rev Progressive Hlthcare................................... 6.375 10/01/20 877,390 1,000 Louisiana Pub Fac Auth Rev Progressive Hlthcare................................... 6.375 10/01/28 826,600 3,354 Louisiana St Univ & Agric & Mechanical College Univ Rev Master Agreement (Acquired 11/30/98, Cost $3,354,341) (c)............. 5.750 10/30/18 3,215,270 ------------ 8,740,925 ------------
See Notes to Financial Statements 13 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MAINE 0.0% $ 25 Maine Hlth & Higher Ed Fac Auth Rev Ser B (Prerefunded @ 07/01/04) (FSA Insd)........ 7.000% 07/01/24 $ 25,872 ------------ MARYLAND 1.2% 1,000 Baltimore Cnty, MD Mtg Rev Shelter Elder Care Ser A................................. 7.250 11/01/29 971,640 730 Maryland St Econ Dev Corp Air Cargo Rev Afco Cargo BWI II LLC Proj................. 6.250 07/01/07 718,787 1,200 Maryland St Econ Dev Corp MD Golf Course Sys........................................ 8.250 06/01/28 1,138,008 1,000 Maryland St Hlth & Higher Medstar Hlth Rfdg....................................... 5.500 08/15/33 1,016,130 3,000 Montgomery Cnty, MD Econ Dev Editorial Proj In Ed Ser A (Acquired 09/28/98, Cost $3,002,660) (c)............................ 6.400 09/01/28 2,892,330 3,000 Prince Georges Cnty, MD Spl Oblig Spl Assmt Woodview Ser A............................. 8.000 07/01/26 3,280,200 ------------ 10,017,095 ------------ MASSACHUSETTS 3.7% 1,000 Massachusetts St Dev Fin Agy Briarwood Ser B.......................................... 8.000 12/01/22 1,061,260 910 Massachusetts St Dev Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 07/27/00, Cost $910,000) (c).............................. 7.750 06/01/18 942,705 1,965 Massachusetts St Dev Fin Agy Rev Hillcrest Ed Ctr Inc................................. 6.375 07/01/29 1,906,070 3,000 Massachusetts St Dev Fin Agy Rev Hlthcare Fac Alliance Ser A......................... 7.100 07/01/32 2,985,030 1,000 Massachusetts St Dev Fin Agy Rev MCHSP Human Svc Providers Ser A (Prerefunded @ 07/01/10).................................. 8.000 07/01/20 1,279,060 3,765 Massachusetts St Dev Fin Agy Rev New England Ctr For Children................... 6.000 11/01/19 3,788,682 3,100 Massachusetts St Hlth & Ed Civic Investments Ser B.......................... 9.150 12/15/23 3,622,505 1,000 Massachusetts St Hlth & Ed Nichols College Issue Ser C................................ 6.000 10/01/17 1,042,550 1,929 Massachusetts St Hsg Fin Agy Hsg Rev Insd Rental Ser A (AMBAC Insd).................. 6.650 07/01/19 1,976,058 1,940 Massachusetts St Indl Fin Agy Assisted Living Fac Rev Marina Bay LLC Proj......... 7.500 12/01/27 1,985,532 1,000 Massachusetts St Indl Fin Agy Assisted Living Fac Rev Newton Group Pptys LLC Proj....................................... 8.000 09/01/27 1,064,590 645 Massachusetts St Indl Fin Agy Rev First Mtg GF/Pilgrim Inc Proj........................ 6.500 10/01/15 590,085
14 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $ 2,000 Massachusetts St Indl Fin Agy Rev First Mtg GF/Pilgrim Inc Proj........................ 6.750% 10/01/28 $ 1,767,140 795 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/98, Cost $795,000) (c).............................. 6.200 06/01/08 773,376 2,900 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/98, Cost $2,900,000) (c)............................ 6.375 06/01/18 2,784,377 4,500 Massachusetts St Indl Fin Agy Rev Swr Fac Res Ctl Composting (Acquired 08/10/89, Cost $4,500,000) (c)............................ 9.250 06/01/10 4,513,410 ------------ 32,082,430 ------------ MICHIGAN 1.3% 895 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $895,000) (c).............................. 6.850 05/01/21 879,481 1,700 Hillsdale, MI Hosp Fin Hillsdale Cmnty Hlth Ctr........................................ 5.000 05/15/13 1,655,834 2,390 Meridian, MI Econ Dev Corp Ltd Oblig Rev First Mtg Burcham Hills Ser A Rfdg......... 7.500 07/01/13 2,457,565 3,430 Meridian, MI Econ Dev Corp Ltd Oblig Rev First Mtg Burcham Hills Ser A Rfdg......... 7.750 07/01/19 3,539,074 995 Michigan Muni Bd Auth Rev Pub Sch Academy Fac Pgm.................................... 8.125 10/01/31 973,110 11,084 Michigan St Strategic Fd Ltd Oblig Rev Great Lakes Pulp & Fiber Proj (a) (g)...... 8.000 12/01/27 1,618,198 ------------ 11,123,262 ------------ MINNESOTA 3.1% 2,000 Aitkin, MN Hlth Fac Rev Riverwood Hlthcare Ctr Proj................................... 7.750 02/01/31 2,007,260 1,000 Cambridge, MN Hsg & Hlthcare Fac Rev Grandview West Proj Ser B.................. 6.000 10/01/33 850,810 2,000 Carlton, MN Hlth & Hsg Fac Intermediate Faith Social Svc Inc Proj.................. 7.500 04/01/19 2,094,080 1,000 Dakota Cnty, MN Hsg & Redev................ 6.250 05/01/29 918,460 2,500 Duluth, MN Econ Dev Auth Benedictine Hlth Sys Saint Marys............................ 5.250 02/15/33 2,558,850 1,500 Duluth, MN Econ Dev Auth Saint Lukes Hosp.. 7.250 06/15/32 1,585,755 2,000 Glencoe, MN Hlthcare Fac Rev............... 7.500 04/01/31 2,167,660 6,890 Minneapolis & Saint Paul, MN Met Northwest Airl Proj Ser A............................ 7.000 04/01/25 6,497,408 1,000 Minneapolis & Saint Paul, MN Met Northwest Airl Proj Ser B............................ 6.500 04/01/25 946,770 1,425 Ramsey, MN Lease Rev Pact Charter Sch Proj Ser A...................................... 6.750 12/01/33 1,416,678
See Notes to Financial Statements 15 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MINNESOTA (CONTINUED) $ 1,500 Saint Cloud, MN Hsg & Redev Auth Sterling Heights Apt Proj........................... 7.550% 04/01/39 $ 1,480,005 1,225 Saint Paul, MN Hsg & Redev Auth Hosp Rev Healtheast Proj Ser A Rfdg................. 6.625 11/01/17 1,243,265 1,000 Saint Paul, MN Hsg & Redev Cmnty of Peace Academy Proj Ser A......................... 7.875 12/01/30 1,102,020 1,500 Saint Paul, MN Port Auth Hotel Fac Rev Radisson Kellogg Proj Ser 2 Rfdg........... 7.375 08/01/29 1,532,235 ------------ 26,401,256 ------------ MISSOURI 4.2% 1,000 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg........................... 6.125 10/01/21 1,032,060 1,000 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg........................... 7.000 10/01/21 1,088,510 320 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj........................... 7.250 04/01/07 326,144 3,095 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj........................... 7.625 04/01/17 3,307,874 484 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj........................... 7.625 04/01/18 515,775 1,525 Jefferson Cnty, MO Jr College Dist Student Hsg Sys Rev Jefferson College.............. 7.250 07/01/31 1,507,783 992 Kansas City, MO Indl Dev Auth Multi-Family Hsg Rev Brentwood Manor Apt Proj Ser B..... 7.250 10/15/38 983,260 1,831 Kansas City, MO Multi-Family Hsg Rev Northwoods Apts Proj Ser A................. 6.450 05/01/40 1,831,000 960 Kansas City, MO Multi-Family Hsg Rev Vlg Green Apt Proj............................. 6.250 04/01/30 605,597 3,000 Kansas City, MO Indl Dev Plaza Lib Proj (d)........................................ 5.900 03/01/24 2,939,310 10,820 Missouri St Hlth & Edl Fac Rev Drivers Ser 362 (Acquired 07/21/03, Cost $12,117,239) (c)........................................ 9.160 05/15/11 12,465,614 2,220 Nevada, MO Hosp Rev Nevada Regional Med Ctr........................................ 6.750 10/01/22 2,306,425 5,000 Saline Cnty, MO Indl Dev Auth Hlth Fac Rev (Acquired 01/12/99, Cost $4,909,673) (c)... 6.500 12/01/28 5,112,900 1,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 6.000 06/01/15 1,214,400 1,305 Three Riv Jr College Dist MO Cmnty College.................................... 7.000 09/01/18 1,188,698 ------------ 36,425,350 ------------ NEVADA 0.1% 1,000 Clark Cnty, NV Pollutn Ctl Rev Southn Calif Rfdg....................................... 3.250 06/01/31 998,400 ------------
16 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- NEW HAMPSHIRE 0.7% $ 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Havenwood-Heritage Heights................. 7.350% 01/01/18 $ 2,044,840 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Havenwood-Heritage Heights................. 7.450 01/01/25 2,038,120 1,000 New Hampshire Hlth & Ed Fac Auth Rev NH College Issue.............................. 7.500 01/01/31 1,085,070 1,000 New Hampshire St Business Fin Auth Rev Alice Peck Day Hlth Sys Ser A.............. 6.875 10/01/19 1,009,020 ------------ 6,177,050 ------------ NEW JERSEY 4.9% 2,240 Camden Cnty, NJ Impt Auth Lease Rev Dockside Refrig (Acquired 01/29/97, Cost $2,333,391) (a) (b) (c).................... 8.400 04/01/24 1,836,800 1,940 New Jersey Econ Dev Auth Asstd Living Rev........................................ 6.750 08/01/30 1,742,702 2,000 New Jersey Econ Dev Auth Cedar Crest Vlg Inc Fac Ser A.............................. 7.000 11/15/16 2,043,960 2,000 New Jersey Econ Dev Auth Continental Airl Inc Proj................................... 6.250 09/15/19 1,694,120 2,000 New Jersey Econ Dev Auth First Mtg Franciscan Oaks Proj....................... 5.700 10/01/17 1,859,840 1,000 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.000 11/15/15 1,081,800 1,000 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.125 11/15/18 1,058,690 1,440 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.125 11/15/23 1,556,323 1,000 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06).................................. 8.500 11/01/16 1,181,550 1,500 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06).................................. 8.625 11/01/25 1,776,855 1,580 New Jersey Econ Dev Auth Rev Kullman Assoc Proj Ser A................................. 6.125 06/01/18 1,352,606 2,000 New Jersey Econ Dev Auth Rev Sr Living Fac Esplanade Bear............................. 7.000 06/01/39 1,675,160 3,000 New Jersey Econ Dev Auth Rev Sr Mtg Arbor Glen Proj Ser A (Prerefunded @ 05/15/06)... 8.750 05/15/26 3,503,670 4,030 New Jersey Econ Dev Auth Spl Fac Rev Continental Airl Inc Proj.................. 6.400 09/15/23 3,367,871 4,000 New Jersey Econ Dev Auth Spl Fac Rev Continental Airl Inc Proj.................. 6.250 09/15/29 3,218,080 10,000 New Jersey Econ Dev Auth Tics Ser 1 (AMBAC Insd) (Acquired 01/21/04, Cost $11,423,683) (c)........................................ 8.837 03/01/11 11,353,500
See Notes to Financial Statements 17 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- NEW JERSEY (CONTINUED) $ 1,010 New Jersey Hlthcare Fac Fin Auth Rev Raritan Bay Med Ctr Issue Rfdg............. 7.250% 07/01/14 $ 1,045,401 1,060 New Jersey St Ed Fac Auth Rev Felician College of Lodi Ser D (Acquired 11/07/97, Cost $1,060,000) (c)....................... 7.375 11/01/22 1,074,851 ------------ 42,423,779 ------------ NEW MEXICO 0.6% 4,155 Albuquerque, NM Retirement Fac Rev La Vida Llena Proj Ser B Rfdg...................... 6.600 12/15/28 4,114,489 1,030 New Mexico Hsg Auth Region III Sr Brentwood Gardens Apt Ser A.......................... 6.850 12/01/31 1,000,068 ------------ 5,114,557 ------------ NEW YORK 6.4% 985 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van Allen Proj Ser A........................... 6.875 06/01/39 889,997 1,400 Brookhaven, NY Indl Dev Agy Sr Residential Hsg Rev Woodcrest Estates Fac Ser A........ 6.375 12/01/37 1,306,746 3,500 Dutchess Cnty, NY Indl Dev Agy Saint Francis Hosp Ser A Rfdg (d)................ 7.500 03/01/29 3,484,040 2,220 Monroe Cnty, NY Indl Dev Agy Woodland Vlg Proj....................................... 8.000 11/15/15 2,373,469 3,000 New York City Indl Dev Agy JFK Intl Arpt Proj Ser B................................. 8.500 08/01/28 2,400,000 10,000 New York City Muni Wtr Fin Fiscal 2004 Ser C.......................................... 5.000 06/15/22 10,593,900 5,000 New York City Ser A........................ 7.000 08/01/07 5,606,450 2,130 New York City Ser D........................ 8.000 02/01/05 2,247,001 870 New York City Ser D (Escrowed to Maturity).................................. 8.000 02/01/05 920,025 5,000 New York City Ser I (MBIA Insd) (d)........ 5.000 08/01/17 5,452,700 5,000 New York City Transitional Drivers Ser 386 (Acquired 02/02/04, Cost $5,451,630) (c)... 8.660 02/01/12 5,593,000 2,500 New York St Energy Resh & Dev Auth Gas Fac Rev (Inverse Fltg) (h)..................... 11.509 04/01/20 3,207,875 1,980 Saratoga Cnty, NY Indl Dev Agy Sr Hsg Rev Highpointe at Malta Proj Ser A............. 6.875 06/01/39 1,815,759 1,000 Suffolk Cnty, NY Indl Dev Agy Continuing Care Retirement Cmnty Rev.................. 7.250 11/01/28 1,051,590 980 Suffolk Cnty, NY Indl Dev Agy Eastern Long Is Hosp Assoc Ser A........................ 7.750 01/01/22 993,269 1,400 Suffolk Cnty, NY Indl Dev Agy Indl Dev Rev Spellman High Voltage Fac Ser A............ 6.375 12/01/17 1,256,556 1,445 Suffolk Cnty, NY Indl Dev Agy Peconic Landing Ser A.............................. 8.000 10/01/20 1,506,384 1,000 Syracuse, NY Indl Dev Agy Rev First Mtg Jewish Home Ser A.......................... 7.375 03/01/31 1,027,810
18 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 2,315 Utica, NY Indl Dev Agy Civic Utica College Civic Fac.................................. 6.750% 12/01/21 $ 2,340,071 1,000 Westchester Cnty, NY Indl Dev Hebrew Hosp Sr Hsg Inc Ser A........................... 7.375 07/01/30 1,068,270 ------------ 55,134,912 ------------ NORTH CAROLINA 1.6% 2,000 North Carolina Med Care Commn First Mtg United Methodist Homes..................... 7.000 10/01/17 2,081,280 10,000 North Carolina St Rites PA 1246 (Acquired 03/16/04, Cost $11,851,983) (c)............ 8.761 03/01/12 11,428,700 ------------ 13,509,980 ------------ NORTH DAKOTA 0.3% 2,000 Grand Forks, ND Sr Hsg Rev Spl Term 4000 Vly Square Proj............................ 6.250 12/01/34 1,885,720 960 Grand Forks, ND Sr Hsg Rev Spl Term 4000 Vly Square Proj............................ 6.375 12/01/34 920,698 ------------ 2,806,418 ------------ OHIO 2.6% 5,000 Athens Cnty, OH Hosp Fac Rev Impt O'Bleness Mem Ser A Rfdg............................. 7.125 11/15/33 5,111,450 3,000 Cleveland-Cuyahoga Cnty, OH Spl Assmt/ Tax Increment.................................. 7.000 12/01/18 3,148,860 623 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park Lane Apts Ser A1 Rfdg (f).................. 6.000/7.625 10/01/37 463,561 1,081 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park Lane Apts Ser A2 Rfdg (a).................. 5.460 10/01/37 24,330 5,000 Cuyahoga Cnty, OH Rev Ser A Rfdg........... 6.000 01/01/32 5,422,100 1,760 Dayton, OH Spl Fac Rev Afco Cargo Day LLC Proj....................................... 6.300 04/01/22 1,536,797 2,650 Erie Cnty, OH Hosp Fac Rev Firelands Regl Med Ctr Ser A.............................. 5.625 08/15/32 2,774,365 1,500 Lucas Cnty, OH Hlthcare & Impt Sunset Retirement Rfdg............................ 6.500 08/15/20 1,605,645 2,905 Madison Cnty, OH Hosp Impt Rev Madison Cnty Hosp Proj Rfdg............................. 6.400 08/01/28 2,715,797 ------------ 22,802,905 ------------ OKLAHOMA 1.7% 685 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.000 08/01/10 685,774 750 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.400 08/01/17 742,080 1,000 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.625 08/01/20 995,230 1,000 Oklahoma Cnty, OK Fin Auth Epworth Villa Proj Ser A Rfdg............................ 7.000 04/01/25 1,012,990
See Notes to Financial Statements 19 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- OKLAHOMA (CONTINUED) $ 1,065 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg.................... 5.750% 08/15/12 $ 955,443 1,000 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg.................... 5.750 08/15/15 873,120 4,000 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg.................... 5.625 08/15/19 3,347,680 3,250 Tulsa Cnty, OK Pub Fac Auth (AMBAC Insd)... 6.250 11/01/22 3,856,808 3,000 Tulsa, OK Muni Arpt Tr Rev Amern Airl Proj Rfdg....................................... 6.250 06/01/20 2,590,290 ------------ 15,059,415 ------------ OREGON 0.9% 2,000 Clackamas Cnty, OR Hosp Fac Willamette View Inc Proj Ser A............................. 7.500 11/01/29 2,130,480 2,145 Clatsop Care Ctr Hlth Dist OR Rev Sr Hsg... 6.875 08/01/28 2,161,645 3,878 Oregon St Hlth Hsg Ed & Cultural Fac Auth....................................... 7.250 06/01/28 3,811,893 ------------ 8,104,018 ------------ PENNSYLVANIA 7.9% 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/15 2,215,500 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/22 2,215,500 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/30 2,215,500 2,000 Allegheny Cnty, PA Indl Dev Auth Lease Rev........................................ 6.625 09/01/24 1,841,820 6,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev Collateral Toledo Edison Co Proj Ser A Rfdg....................................... 7.750 05/01/20 6,615,120 1,000 Berks Cnty, PA Muni Auth Rev Phoebe Berks Vlg Inc Proj Rfdg (Prerefunded @ 05/15/06).................................. 7.700 05/15/22 1,141,600 1,000 Bucks Cnty, PA Indl Dev Auth Rev First Mtg Hlthcare Fac Chandler...................... 6.200 05/01/19 960,790 1,500 Chester Cnty, PA Hlth & Ed Fac Chester Cnty Hosp Ser A................................. 6.750 07/01/31 1,492,200 2,500 Cliff House Ctf Trust Var Sts Ctf Part Ser A.......................................... 6.625 06/01/27 2,038,600 2,000 Cumberland Cnty, PA Indl Dev Auth Rev First Mtg Woods Cedar Run Ser A Rfdg (a)......... 6.500 11/01/28 1,410,600 5,000 Dauphin Cnty, PA Gen Auth Rev Hotel & Conf Ctr Hyatt Regency (Acquired 08/04/98, Cost $4,876,575) (c)............................ 6.200 01/01/29 3,406,300 3,000 Dauphin Cnty, PA Gen Auth Rev Office & Pkg Riverfront Office.......................... 6.000 01/01/25 2,764,470 1,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Ctr Saint Anne's Home.......................... 6.625 04/01/28 1,003,870 1,200 Lehigh Cnty, PA Gen Purp Auth First Mtg Bible Fellowship Church.................... 7.625 11/01/21 1,305,048 2,000 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace Oblig Group Rfdg........................... 6.000 11/01/23 2,003,420 1,000 Lehigh Cnty, PA Indl Dev Auth Hlth Fac Rev Lifepath Inc Proj.......................... 6.100 06/01/18 900,730
20 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) $ 2,000 Montgomery Cnty, PA Higher Ed & Temple Continuing Care Ctr (a).................... 6.750% 07/01/29 $ 401,800 500 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The Meadowood Corp Rfdg................ 7.000 12/01/10 520,545 2,500 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The Meadowood Corp Rfdg................ 7.250 12/01/15 2,540,475 6,000 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The Meadowood Corp Rfdg................ 7.400 12/01/20 6,112,560 925 Montgomery Cnty, PA Indl Dev Auth Rev Wordsworth Academy......................... 7.750 09/01/24 933,501 1,435 Northeastern PA Hosp & Ed Auth Hlthcare Rev........................................ 7.125 10/01/29 1,405,310 3,000 Pennsylvania Econ Dev Fin Auth Res Recovery Rev Colver Proj Ser D...................... 7.050 12/01/10 3,119,550 5,675 Pennsylvania St Drivers Ser 396 (Acquired 03/01/04, Cost $6,920,703) (c)............. 9.180 10/15/09 6,743,716 980 Pennsylvania St Higher Ed Student Assn Inc Proj Ser A................................. 6.750 09/01/32 1,024,923 2,150 Philadelphia, PA Auth Indl Dev Rev Coml Dev Rfdg....................................... 7.750 12/01/17 2,183,196 4,105 Philadelphia, PA Gas Wks Rev Drivers Ser 384 (FSA Insd) (Acquired 01/20/04, Cost $4,938,634) (c)............................ 9.380 07/01/11 4,917,585 1,500 Scranton Lackawanna, PA Hlth & Welfare Auth Rev Rfdg................................... 7.250 01/15/17 1,485,015 2,000 Scranton Lackawanna, PA Hlth & Welfare Auth Rev Rfdg................................... 7.350 01/15/22 1,976,260 1,500 Westmoreland Cnty, PA Indl Dev Hlthcare Fac Redstone Ser B............................. 8.000 11/15/23 1,627,485 ------------ 68,522,989 ------------ RHODE ISLAND 0.3% 1,825 Rhode Island St Econ Dev Corp Rev Oblig Providence Place........................... 7.250 07/01/20 1,791,128 1,000 Rhode Island St Health & Ed Hosp Fin Ser A.......................................... 6.000 09/15/33 1,016,530 ------------ 2,807,658 ------------ SOUTH CAROLINA 0.4% 115 Charleston Cnty, SC Ctf Part Ser B (MBIA Insd)...................................... 7.000 06/01/19 118,380 1,000 Oconee Cnty, SC Indl Rev Bond Johnson Ctl Inc Ser 84................................. 3.198 06/15/04 1,014,250 2,000 South Carolina Jobs Econ Dev First Mtg Westley Commons Proj....................... 7.750 10/01/24 1,850,120 ------------ 2,982,750 ------------
See Notes to Financial Statements 21 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- SOUTH DAKOTA 0.4% $ 355 Keystone, SD Econ Dev Rev Wtr Quality Mgmt Corp Ser A................................. 5.500% 12/15/08 $ 341,837 1,760 Keystone, SD Econ Dev Rev Wtr Quality Mgmt Corp Ser A................................. 6.000 12/15/18 1,583,648 1,500 Sioux Falls, SD Multi-Family Hsg Inn Westport Proj Ser A (Acquired 01/26/04, Cost $1,508,197) (c)....................... 7.500 12/01/34 1,519,590 ------------ 3,445,075 ------------ TENNESSEE 2.0% 3,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg (MBIA Insd)................................ 7.750 07/01/29 3,930,900 1,000 Johnson City, TN Hlth & Ed First Mtg Mtn States Hlth Ser A Rfdg..................... 7.500 07/01/33 1,152,800 2,965 SCA Tax Exempt Trust Multi-Family Mtg Memphis Hlth Ed Rev Ser A6 (FSA Insd)...... 7.350 01/01/30 3,077,018 5,495 Sullivan Cnty, TN Hlth Ed & Hsg Fac Brd Rev........................................ 8.410 11/01/19 5,499,836 2,900 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj Ser A (Acquired 06/08/89, Cost $2,900,000) (c)............................ 10.000 11/01/19 3,097,983 1,160 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj Ser B (Acquired 06/08/89, Cost $1,160,000) (a) (b) (c)................................ 10.000 11/01/20 116,000 ------------ 16,874,537 ------------ TEXAS 8.3% 680 Abia Dev Corp TX Arpt Fac Rev Austin Belly Port Dev LLC Proj Ser A.................... 6.250 10/01/08 661,110 3,000 Abia Dev Corp TX Arpt Fac Rev Austin Belly Port Dev LLC Proj Ser A.................... 6.500 10/01/23 2,715,030 1,000 Atlanta, TX Hosp Auth Fac Rev.............. 6.700 08/01/19 973,770 2,035 Atlanta, TX Hosp Auth Fac Rev.............. 6.750 08/01/29 1,956,164 1,000 Austin-Bergstorm Landhost Enterprises Inc TX Arpt Hotel Sr Ser A..................... 6.750 04/01/27 619,970 1,960 Bell Cnty, TX Indl Dev Corp Solid Waste Disposal Rev............................... 7.600 12/01/17 683,903 1,000 Bexar Cnty, TX Hsg Fin Corp Multi-Family Hsg Rev Woodland Ridge Apt Proj Ser A...... 7.000 01/01/39 983,210 2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp..... 5.375 01/01/32 2,048,620 735 Comal Cnty, TX Hlth Fac Dev Hlthcare Sys McKenna Mem Proj Ser A..................... 6.250 02/01/32 761,857 1,825 Dallas Cnty, TX Flood Ctl Dist No 1 Cap Apprec Rfdg (Acquired 08/28/89, Cost $973,952) (c).............................. * 08/01/11 1,058,701 3,445 Dallas Cnty, TX Flood Ctl Dist No 1 Rfdg... 7.250 04/01/32 3,584,488 2,970 Dallas, TX Wtrwks & Swr Sys Rev Rfdg....... 5.750 10/01/17 3,411,847 2,500 Garland, TX Indl Dev Auth Rev Bond Ashland Oil Proj Ser 84 Rfdg....................... 8.920 04/01/04 2,500,000
22 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 6,400 Houston, TX Arpt Sys Rev Spl Fac Continental Airl Ser B..................... 6.125% 07/15/17 $ 5,327,104 3,000 Houston, TX Arpt Sys Rev Spl Fac Continental Airl Ser C..................... 5.700 07/15/29 2,187,390 1,750 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA Insd)................................. 5.125 07/01/32 1,787,993 1,000 Houston, TX Hlth Facs Dev Corp Buckingham Sr Living Cmnty Ser A...................... 7.125 02/15/34 1,013,470 8,880 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (FSA Insd) (Acquired 10/20/99, Cost $9,026,585) (c)............. 10.389 05/15/14 11,622,588 3,750 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (FSA Insd) (Acquired 10/20/99, Cost $3,784,875) (c)............. 10.389 05/15/15 4,886,063 1,445 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg Carillon Proj Ser A........................ 6.500 07/01/19 1,098,951 2,295 Meadow Parc Dev Inc TX Multi-Family Rev Hsg Meadow Parc Apt Proj....................... 6.500 12/01/30 2,130,953 2,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj........................ 7.250 01/01/31 2,413,375 2,880 Midlothian, TX Dev Auth Tax Increment Contract Rev............................... 6.700 11/15/23 2,961,619 2,000 Midlothian, TX Dev Auth Tax Increment Contract Rev............................... 7.875 11/15/26 2,229,080 250 San Antonio, TX Hlth Fac Dev Corp Rev Encore Nursing Ctr Part.................... 8.250 12/01/19 253,233 1,732 Texas Gen Svcs Comm Part Interests......... 7.250 08/01/11 1,763,273 2,450 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev (Inverse Fltg) (h) (GNMA Collateralized)............................ 6.900 07/02/24 2,536,853 465 Texas St Higher Ed Coordinating Brd College Student Ln Rev............................. 7.849 10/01/25 465,721 1,500 Texas St Student Hsg Corp MSU Proj Midwestern St Univ......................... 6.500 09/01/34 1,598,535 1,750 Tomball, TX Hosp Auth Rev Hosp Tomball Regl Hosp....................................... 6.000 07/01/29 1,796,830 985 Wichita Cnty,TX Hlth Fac Rolling Meadows Fac Ser A Rfdg............................. 6.250 01/01/28 980,656 2,500 Woodhill Pub Fac Corp TX Hsg-Woodhill Apt Proj....................................... 7.500 12/01/29 2,474,350 ------------ 71,486,707 ------------ UTAH 0.1% 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (a)................................... 7.800 09/01/15 313,750 1,165 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (a)................................... 8.000 09/01/20 365,519
See Notes to Financial Statements 23 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- UTAH (CONTINUED) $ 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (a)................................... 7.800% 09/01/25 $ 313,750 140 Utah St Hsg Fin Agy Single Family Mtg Mezz A1 (AMBAC Insd)............................ 6.100 07/01/13 147,385 ------------ 1,140,404 ------------ VERMONT 0.3% 1,015 Vermont Ed & Hlth Bldg Fin Agy Rev Hlthcare Fac Copley Manor Proj (a).................. 6.250 04/01/29 455,644 1,000 Vermont Ed & Hlth Bldg Fin Agy Rev VT Council Dev Mental Hlth Ser A.............. 6.000 12/15/09 1,123,660 1,000 Vermont Ed & Hlth Bldg Fin Bennington College Proj............................... 6.625 10/01/29 1,014,220 ------------ 2,593,524 ------------ VIRGINIA 1.6% 1,000 Greensville Cnty, VA Indl Dev Wheeling Steel Proj Ser A........................... 7.000 04/01/14 675,610 2,500 Henrico Cnty, VA Econ Dev Auth Residential Care Fac Rev Utd Methodist Ser A Rfdg...... 6.500 06/01/22 2,561,050 6,000 Peninsula Port Auth VA Residential Care Fac Rev VA Baptist Homes Ser A................. 7.375 12/01/32 6,340,800 1,500 Pittsylvania Cnty, VA Indl Dev Auth Rev Exempt Fac Ser A (Acquired 04/15/97, Cost $1,534,146) (c)............................ 7.450 01/01/09 1,490,550 1,000 Roanoke Cnty, VA Indl Dev Auth Glebe Inc Ser A...................................... 6.300 07/01/35 1,022,220 1,700 Virginia Small Business Fin Auth Rev Indl Dev SIL Clean Wtr Proj..................... 7.250 11/01/24 1,698,402 ------------ 13,788,632 ------------ WASHINGTON 1.3% 6,580 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd).......................... 5.500 07/01/17 7,321,698 1,000 King Cnty, WA Pub Hosp Dist No 004 Snoqualmie Vly Hosp........................ 7.250 12/01/15 1,039,000 1,000 Port Seattle, WA Spl Fac Rev Northwest Airl Proj....................................... 7.125 04/01/20 945,870 2,000 Port Seattle, WA Spl Fac Rev Northwest Airl Proj....................................... 7.250 04/01/30 1,843,000 ------------ 11,149,568 ------------ WISCONSIN 1.2% 800 Baldwin, WI Hosp Rev Mtg Ser A............. 6.125 12/01/18 801,864 1,000 Baldwin, WI Hosp Rev Mtg Ser A............. 6.375 12/01/28 1,003,930 1,750 Milwaukee, WI Rev Sr Air Cargo............. 6.500 01/01/25 1,803,883 3,000 Wisconsin St Hlth & Ed Fac Auth Rev Milwaukee Catholic Home Inc Proj........... 7.500 07/01/26 3,032,370
24 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- WISCONSIN (CONTINUED) $ 1,000 Wisconsin St Hlth & Ed Fac Auth Rev Oakwood Vlg Proj Ser A............................. 7.625% 08/15/30 $ 1,042,140 1,000 Wisconsin St Hlth & Ed Fac Divine Savior Hlthcare Ser C............................. 7.500 05/01/32 1,053,050 1,500 Wisconsin St Hlth & Ed Fac Southwest Hlth Ctr Ser A (d).............................. 6.125 04/01/24 1,482,810 ------------ 10,220,047 ------------ WYOMING 0.2% 1,500 Teton Cnty, WY Hosp Dist Hosp Saint Johns Med Ctr.................................... 6.750 12/01/27 1,525,005 ------------ PUERTO RICO 0.2% 2,465 Puerto Rico Port Auth Rev Spl Fac Amern Airl Ser A................................. 6.250 06/01/26 1,756,386 ------------ U. S. VIRGIN ISLANDS 0.3% 2,500 Northern Mariana Islands Ser A............. 7.375 06/01/30 2,592,050 ------------ TOTAL MUNICIPAL BONDS 93.7% (Cost $833,830,295)........................................................... 809,481,670 ------------ Description EQUITIES 0.0% Mobile Energy Services Co. LLC (795 Common Shares) (c) (e)...................... 0 ------------ TOTAL LONG-TERM INVESTMENTS 93.7% (Cost $833,830,295)........................................................... 809,481,670 ------------ SHORT-TERM INVESTMENTS 7.3% 9,650 Atlanta, GA Wtr & Wastewtr Rev Ser C (FSA Insd) (i).................................. 1.100 11/01/41 9,650,000 3,800 Farmington, NM Pollutn Ctl Rev AZ Pub Svc Co Ser B Rfdg (i).......................... 1.100 09/01/24 3,800,000 5,700 Hapeville, GA Dev Auth Indl Dev Rev Hapeville Hotel Ltd (i).................... 1.080 11/01/15 5,700,000 1,900 Illinois Dev Fin Auth Rev Saint Augustine College Proj (i)........................... 1.100 11/01/31 1,900,000 3,100 Long Island Pwr Auth NY Elec Sub Ser 2 (i)........................................ 1.100 05/01/33 3,100,000 14,320 Massachusetts St Hlth & Ed Fac Auth Rev Assets Prog Ser D (MBIA Insd) (i).......... 1.080 01/01/35 14,320,000 3,600 Nebraska Ed Fin Auth Rev Creighton Univ Proj (AMBAC Insd) (i)...................... 1.120 03/01/33 3,600,000
See Notes to Financial Statements 25 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS (CONTINUED) $ 2,500 New York City Adj Ser H Sub Ser H 3 (FSA Insd) (i).................................. 1.100% 08/01/23 $ 2,500,000 1,500 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Adj Ser G (FGIC Insd) (i).......... 1.100 06/15/24 1,500,000 10,000 New York City Var Sub Ser A-7 (i).......... 1.100 08/01/20 10,000,000 1,600 Orange Cnty, FL Sch Brd Ctfs Ser B (MBIA Insd) (i).................................. 1.100 08/01/27 1,600,000 2,000 South Dakota St Health & Ed Rapid City Regional Hosp (MBIA Insd) (i).............. 1.120 09/01/27 2,000,000 3,400 Uinta Cnty, WY Pollutn Ctl Rev Chevron USA Inc Proj Rfdg (i).......................... 1.100 08/15/20 3,400,000 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $63,070,000)............................................................ 63,070,000 ------------ TOTAL INVESTMENTS 101.0% (Cost $896,900,295)........................................................... 872,551,670 LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%)................................... (8,996,579) ------------ NET ASSETS 100.0%.............................................................. $863,555,091 ============
* Zero coupon bond (a) Non-income producing security. (b) This borrower has filed for protection in federal bankruptcy court. (c) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 15.8% of net assets. (d) Securities purchased on a when-issued or delayed delivery basis. (e) Market value is determined in accordance with procedures established in good faith by the Board of Trustees. (f) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (g) Payment-in-kind security. (h) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. All of the Fund's portfolio holdings including derivative instruments, are marked to market each day with the change in value reflected in the 26 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued unrealized appreciation/depreciation. Upon disposition a realized gain or loss is recognized accordingly. (i) Security includes a put feature allowing the fund to periodically put the security back to the issuer at amortized cost on specified put dates. The interest rate shown represents the current interest rate earned by the Fund based on the most recent reset date. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association MBIA--Municipal Bond Investors Assurance Corp. See Notes to Financial Statements 27 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2004 (Unaudited) ASSETS: Total Investments (Cost $896,900,295)....................... $872,551,670 Cash........................................................ 131,181 Receivables: Fund Shares Sold.......................................... 17,498,428 Interest.................................................. 16,050,822 Investments Sold.......................................... 1,189,000 Other....................................................... 151,748 ------------ Total Assets............................................ 907,572,849 ------------ LIABILITIES: Payables: Investments Purchased..................................... 40,219,005 Fund Shares Repurchased................................... 1,315,824 Income Distributions...................................... 1,263,292 Distributor and Affiliates................................ 521,230 Investment Advisory Fee................................... 325,983 Trustees' Deferred Compensation and Retirement Plans........ 208,406 Accrued Expenses............................................ 164,018 ------------ Total Liabilities....................................... 44,017,758 ------------ NET ASSETS.................................................. $863,555,091 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $977,262,762 Accumulated Undistributed Net Investment Income............. 4,140,044 Net Unrealized Depreciation................................. (24,348,625) Accumulated Net Realized Loss............................... (93,499,090) ------------ NET ASSETS.................................................. $863,555,091 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $675,285,804 and 51,473,713 shares of beneficial interest issued and outstanding)............. $ 13.12 Maximum sales charge (4.75%* of offering price)......... .65 ------------ Maximum offering price to public........................ $ 13.77 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $124,830,467 and 9,520,246 shares of beneficial interest issued and outstanding)............. $ 13.11 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $63,438,820 and 4,803,733 shares of beneficial interest issued and outstanding)............. $ 13.21 ============
* On sales of $100,000 or more, the sales charge will be reduced. 28 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 24,933,298 ------------ EXPENSES: Investment Advisory Fee..................................... 1,770,329 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $702,451, $577,907 and $193,682, respectively)............................................. 1,474,040 Legal....................................................... 271,760 Shareholder Services........................................ 232,109 Custody..................................................... 30,657 Trustees' Fees and Related Expenses......................... 14,163 Other....................................................... 214,705 ------------ Total Expenses.......................................... 4,007,763 ------------ NET INVESTMENT INCOME....................................... $ 20,925,535 ============ REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Loss........................................... $ (9,856,461) ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... (37,860,779) End of the Period......................................... (24,348,625) ------------ Net Unrealized Appreciation During the Period............... 13,512,154 ------------ NET REALIZED AND UNREALIZED GAIN............................ $ 3,655,693 ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 24,581,228 ============
See Notes to Financial Statements 29 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 20,925,535 $ 43,426,498 Net Realized Loss.................................... (9,856,461) (3,546,709) Net Unrealized Appreciation/Depreciation During the Period............................................. 13,512,154 (11,454,464) ------------ ------------- Change in Net Assets from Operations................. 24,581,228 28,425,325 ------------ ------------- Distributions from Net Investment Income: Class A Shares..................................... (16,496,418) (31,090,893) Class B Shares..................................... (2,878,869) (6,152,493) Class C Shares..................................... (974,251) (1,735,013) ------------ ------------- Total Distributions.................................. (20,349,538) (38,978,399) ------------ ------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... 4,231,690 (10,553,074) ------------ ------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 187,001,977 55,882,726 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 13,117,286 24,291,545 Cost of Shares Repurchased........................... (51,572,953) (125,918,977) ------------ ------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 148,546,310 (45,744,706) ------------ ------------- TOTAL INCREASE/DECREASE IN NET ASSETS................ 152,778,000 (56,297,780) NET ASSETS: Beginning of the Period.............................. 710,777,091 767,074,871 ------------ ------------- End of the Period (Including accumulated undistributed net investment income of $4,140,044 and $3,564,047, respectively)...................... $863,555,091 $ 710,777,091 ============ =============
30 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ------------------------------------------------ 2004 2003 2002 (A) 2001 2000 1999 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $13.03 $13.21 $13.25 $13.27 $13.91 $15.08 ------ ------ ------ ------ ------ ------ Net Investment Income............ .38 .79 .78 .77 .77 .81 Net Realized and Unrealized Gain/Loss...................... .09 (.25) (.11) (.05) (.63) (1.17) ------ ------ ------ ------ ------ ------ Total from Investment Operations... .47 .54 .67 .72 .14 (.36) Less Distributions from Net Investment Income................ .38 .72 .71 .74 .78 .81 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $13.12 $13.03 $13.21 $13.25 $13.27 $13.91 ====== ====== ====== ====== ====== ====== Total Return (b)................... 3.61%* 4.21% 5.28% 5.46% 1.27% -2.51% Net Assets at End of the Period (In millions)........................ $675.3 $560.9 $579.1 $607.1 $621.5 $745.2 Ratio of Expenses to Average Net Assets........................... .94% .89% .86% .87% .91% .96% Ratio of Net Investment Income to Average Net Assets............... 5.88% 6.07% 5.99% 5.88% 5.91% 5.46% Portfolio Turnover................. 11%* 14% 14% 22% 37% 77%
* Non-Annualized (a) As required, effective October 31, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 5.95% to 5.99%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 31 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ------------------------------------------------- 2004 (c) 2003 (c) 2002 (a) 2001 2000 1999 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $13.02 $13.20 $13.24 $13.27 $13.90 $15.07 ------ ------ ------ ------ ------ ------ Net Investment Income........... .33 .69 .70 .68 .69 .69 Net Realized and Unrealized Gain/Loss..................... .09 (.25) (.12) (.06) (.64) (1.16) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .42 .44 .58 .62 .05 (.47) Less Distributions from Net Investment Income............... .33 .62 .62 .65 .68 .70 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.11 $13.02 $13.20 $13.24 $13.27 $13.90 ====== ====== ====== ====== ====== ====== Total Return (b).................. 3.22%* 3.42% 4.49% 4.71% .48% -3.25% Net Assets at End of the Period (In millions)................... $124.8 $115.6 $149.5 $176.5 $221.4 $282.5 Ratio of Expenses to Average Net Assets.......................... 1.69% 1.64% 1.62% 1.63% 1.67% 1.73% Ratio of Net Investment Income to Average Net Assets.............. 5.14% 5.32% 5.23% 5.12% 5.15% 4.70% Portfolio Turnover................ 11%* 14% 14% 22% 37% 77%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 5.19% to 5.23%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4% charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Based on average shares outstanding. 32 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ------------------------------------------------- 2004 (d) 2003 (d) 2002 (a) 2001 2000 1999 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $13.11 $13.20 $13.24 $13.27 $13.90 $15.07 ------ ------ ------ ------ ------ ------ Net Investment Income........... .32 .79 .70 .68 .69 .69 Net Realized and Unrealized Gain/Loss..................... .10 (.26) (.12) (.06) (.64) (1.16) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .42 .53 .58 .62 .05 (.47) Less Distributions from Net Investment Income............... .32 .62 .62 .65 .68 .70 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.21 $13.11 $13.20 $13.24 $13.27 $13.90 ====== ====== ====== ====== ====== ====== Total Return (b).................. 3.27%*(e) 4.10%(c) 4.49% 4.71% .48% -3.25% Net Assets at End of the Period (In millions)................... $ 63.4 $ 34.3 $ 38.5 $ 44.4 $ 49.1 $ 61.5 Ratio of Expenses to Average Net Assets.......................... 1.70%(e) 1.64% 1.62% 1.62% 1.67% 1.73% Ratio of Net Investment Income to Average Net Assets.............. 5.10%(e) 6.00%(c) 5.23% 5.13% 5.15% 4.69% Portfolio Turnover................ 11%* 14% 14% 22% 37% 77%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 5.19% to 5.23%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .68% and .69%, respectively. (d) Based on average shares outstanding. (e) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect the refund of certain 12b-1 fees during the period. See Notes to Financial Statements 33 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Strategic Municipal Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors a high level of current income exempt from federal income tax primarily through investment in a diversified portfolio of medium- and lower-grade municipal securities. The Fund commenced investment operations on June 28, 1985. The distribution of the Fund's Class B and Class C shares commenced on April 30, 1993 and August 13, 1993, respectively. Effective November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2004, the Fund had $40,219,055 of when-issued or delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. 34 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset these losses against any future realized capital gains. At September 30, 2003, the Fund had an accumulated capital loss carryforward for tax purposes of $78,989,131 which expires between September 30, 2004 and September 30, 2011. Of this amount, $9,606,294 will expire on September 30, 2004. At March 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $898,681,907 ============ Gross tax unrealized appreciation........................... $ 31,851,313 Gross tax unrealized depreciation........................... (57,981,550) ------------ Net tax unrealized depreciation on investments.............. $(26,130,237) ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2003 was as follows: Distributions paid from: Ordinary income........................................... $113,206 Long-term capital gain.................................... -0- -------- $113,206 ========
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $103,011
Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of the deferral of losses related to wash sale transactions and the capitalization of reorganization and restructuring costs, and losses recognized for tax purposes but not for book purposes. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
35 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued For the six months ended March 31, 2004, the Fund recognized expenses of approximately $14,800 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $57,200 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent of the Fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $180,100 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $131,937 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2004. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 36 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2004, capital aggregated $765,522,169, $144,443,539 and $67,297,054 for Classes A, B and C, respectively. For the six months ended March 31, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 10,368,220 $136,506,460 Class B................................................... 1,456,399 19,131,733 Class C................................................... 2,366,535 31,363,784 ---------- ------------ Total Sales................................................. 14,191,154 $187,001,977 ========== ============ Dividend Reinvestment: Class A................................................... 828,766 $ 10,844,479 Class B................................................... 125,091 1,635,510 Class C................................................... 48,367 637,297 ---------- ------------ Total Dividend Reinvestment................................. 1,002,224 $ 13,117,286 ========== ============ Repurchases: Class A................................................... (2,776,249) $(36,287,800) Class B................................................... (938,348) (12,259,069) Class C................................................... (229,832) (3,026,084) ---------- ------------ Total Repurchases........................................... (3,944,429) $(51,572,953) ========== ============
At September 30, 2003, capital aggregated $654,459,030, $135,935,365 and $38,322,057 for Classes A, B and C, respectively. For the year ended September 30, 2003, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 3,764,226 $ 48,895,391 Class B................................................... 330,503 4,299,420 Class C................................................... 205,707 2,687,915 ---------- ------------- Total Sales................................................. 4,300,436 $ 55,882,726 ========== ============= Dividend Reinvestment: Class A................................................... 1,530,608 $ 19,879,267 Class B................................................... 256,324 3,326,662 Class C................................................... 83,177 1,085,616 ---------- ------------- Total Dividend Reinvestment................................. 1,870,109 $ 24,291,545 ========== ============= Repurchases: Class A................................................... (6,076,868) $ (78,875,948) Class B................................................... (3,037,630) (39,421,866) Class C................................................... (584,518) (7,621,163) ---------- ------------- Total Repurchases........................................... (9,699,016) $(125,918,977) ========== =============
37 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996 and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares seven years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2004 and the year ended September 30, 2003, 42,486 and 740,191 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received thereon, automatically convert to Class A Shares ten years after the end of the calendar month in which the shares are purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2004 and the year ended September 30, 2003, no Class C Shares converted to Class A Shares. Class B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C Shares will be imposed on most redemptions made within six years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 4.00% 1.00% Second...................................................... 3.75% None Third....................................................... 3.50% None Fourth...................................................... 2.50% None Fifth....................................................... 1.50% None Sixth....................................................... 1.00% None Seventh and Thereafter...................................... None None
For the six months ended March 31, 2004, Van Kampen, as distributor for the Fund, received commissions on sales of the Fund's Class A shares of approximately $290,500 and CDSC on redeemed shares of approximately $76,200. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $188,269,030 and $81,270,159, respectively. 38 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 5. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to 0.25% of Class A average daily net assets and 1.00% each for Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $2,069,200 and $52,000 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in these fees for the six months ended March 31, 2004, are payments retained by Van Kampen of approximately $484,100 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $36,400. 6. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, certain officers of such affiliates and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the named investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser, certain affiliates of the Adviser and certain investment companies advised by the Adviser or its affiliates are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the Van Kampen funds; the funds, including the Fund, are also named as nominal defendants. The complaint in the derivative action alleges that defendants gave a proprietary sales force economic incentives to promote the sale of proprietary mutual funds and that they improperly failed to disclose these economic incentives. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley DW Inc. in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the 39 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Van Kampen funds, rescission of the management contracts for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary damages. This complaint will be coordinated with the consolidated complaint. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 40 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, NY 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, NY 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 41 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 39, 399, 539 STMI SAR 5/04 RN04-00366P-Y03/04 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen California Insured Tax Free Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2004. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. Income may subject certain individuals to the Federal Alternative Minimum Tax (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/04
A SHARES B SHARES C SHARES since 12/13/85 since 04/30/93 since 08/13/93 - ------------------------------------------------------------------------------------------- W/MAX. W/MAX. W/MAX. 3.25% 3.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 7.26% 7.07% 5.24% 5.24% 4.71% 4.71% 10-year 6.27 5.92 5.80 5.80 5.49 5.49 5-year 5.27 4.58 4.56 4.56 4.51 4.51 1-year 4.99 1.59 4.37 1.37 4.15 3.15 6-month 3.09 -0.25 2.92 -0.08 2.70 1.70 - ------------------------------------------------------------------------------------------- 30-Day SEC Yield 2.52% 1.85% 1.85%
Past performance is no guarantee of future results and current performance may be lower or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit vankampen.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. Average annual total return with sales charges includes payment of the maximum sales charge of 3.25 percent for Class A shares, a contingent deferred sales charge of 3.00 percent for Class B shares (in year one and declining to zero after year four), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect their conversion of Class B shares into Class A shares six years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004 Van Kampen California Insured Tax Free Fund is managed by the adviser's Municipal Fixed-Income team. Members of the team include Dennis S. Pietrzak, Executive Director; John R. Reynoldson, Executive Director; and Joseph A. Piraro, Vice President.(1) MARKET CONDITIONS The state of the U.S. economy remained mixed over the six-month period under review. On the positive side, economic growth continued to be robust with Gross Domestic Product growth topping 4% in both quarters. While this strength in output has historically triggered fears of rising interest rates, yields remained stubbornly low across the municipal curve. These low yields were partly the result of the continued low levels of observed inflation in the U.S. economy. Unfortunately, they also reflected continuing weakness in the job market, which remained soft throughout the period. The soft job numbers, coupled with persistently low inflation, led the Federal Open Market Committee (the Fed) to maintain its accommodative stance throughout the period. In keeping with the general trend for calendar year 2003, the six months under review saw record levels of issuance as municipalities sought to take advantage of historically low interest rates. Many cities and states moved to reduce expenditures by refinancing existing debt and replacing it with lower-yielding bonds. In other cases, municipalities attempted to meet current and future funding needs by issuing new debt. Low interest rates also had an impact on the demand for municipal bonds. Retail and institutional investor activity slowed as holders of municipal bonds saw little reason to sell bonds purchased at higher yield levels and reinvest at historically low yields. However, the period was marked by rising activity among non-traditional investors such as hedge funds and insurance companies seeking to take advantage of the perceived attractiveness of municipal bonds relative to taxable securities. Additionally, investors' search for yield led to significant outperformance by lower-rated bonds with greater credit risk. Sectors such as health care, with a preponderance of lower-rated issues, performed particularly well. California remained in the municipal spotlight during the period, with many investors anxiously awaiting the result of the March 2nd referendum on Propositions 57 and 58. These two measures, which voters ultimately approved, gave the green light to an estimated $15 billion economic-improvement bond issuance that will begin to come to the market in early June. The passage of these measures led the major ratings agencies to improve their outlooks (though (1)Team members may change at any time without notice. 2 not their ratings) for the beleaguered state's bonds, with S&P shifting from stable to positive and Moody's shifting from negative to stable. This surge in issuance will at least partially offset the surprising decline in new debt in the first quarter of 2004, which was one-third lower than the level for the first quarter of last year. The majority of debt issued by the state for the entire six-month period offered credit enhancements, with fully two-thirds coming to market with credit insurance. PERFORMANCE ANALYSIS The fund returned 3.09 percent for the six months ended March 31, 2004 (Class A shares, unadjusted for sales charges), performing roughly in line with its benchmark, the Lehman Brothers Municipal Bond Index. (See table below). One of our primary strategies in managing the fund was to adjust its interest-rate sensitivity. Our analysis of the economy and interest rates indicated that the next major movement in rates was likely to be upward, which we believed warranted a more defensive positioning. As a result, we chose to emphasize securities that we believed provided sufficient return potential and were most likely to hold up well in a rising interest-rate environment. This approach led us to de-emphasize bonds from the long end of the yield curve, given their high sensitivity to interest rates and low coupons; instead, we focused on securities with premium coupons from the 18- to 22-year segment of the market in the belief that these bonds offered the most attractive risk/reward profile. We also kept the fund's overall duration (a measure of interest-rate sensitivity) below that of the benchmark. We funded our purchases of intermediate bonds with the proceeds of sales from elsewhere in the portfolio. These sales included several of the fund's intermediate securities, which met our performance targets during the period and were sold at a profit. The fund also benefited from pre-refundings of several securities, which helped support the portfolio's net asset value (NAV). We also maintained the portfolio's diversification over the reporting period. The fund's holdings were spread across the full spectrum of municipal-bond market sectors in order to limit the risk of over-concentration in any one segment. At the end of the period, the portfolio's largest sector weightings were tax districts at 23 percent, followed by public education at 18 percent and public building at 15 percent. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
- -------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 3.09% 2.92% 2.70% 3.12% - --------------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and an index definition. 3 We anticipate that rates will eventually begin to move upward. That being said, we believe the fund is positioned to continue to provide investors with attractive income across an array of possible market environments. We will continue to monitor the California market for attractive investment opportunities. TOP 5 SECTORS AS OF 3/31/04 Tax District 22.6% Public Education 18.0 Public Building 14.9 General Purpose 12.8 Water & Sewer 8.8
Subject to change daily. All information is provided for informational purposes only and should not be deemed as a recommendation to buy or sell securities in the sectors shown above. Securities are classified by sectors that represent broad groupings of related industries. All percentages are as a percentage of long-term investments. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS 99.1% $1,925 Alhambra, CA City Elem Sch Dist Cap Apprec Ser A (FSA Insd)...................................... * 09/01/20 $ 873,026 2,900 Anaheim, CA Pub Fin Auth Rev Elec Sys Generation Ser B Rfdg (FSA Insd)........................... 5.000% 10/01/16 3,158,477 2,000 Anaheim, CA Pub Fin Auth Tax Alloc Rev (Inverse Fltg) (MBIA Insd)............................... 11.720 12/28/18 2,674,060 4,070 Anaheim, CA Uni High Sch Dist Ser A (FSA Insd)........................................... 5.000 08/01/25 4,254,493 1,430 Bay Area Govt Assn CA Lease Rev Cap Proj Ser A (AMBAC Insd).................................... 5.250 07/01/17 1,580,121 3,000 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy Pool Ser A2 (FSA Insd).......................... 6.400 12/15/14 3,163,410 1,730 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA Insd)........................................... 5.500 08/01/17 1,950,679 1,850 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA Insd)........................................... 5.500 08/01/18 2,073,295 2,445 Calexico, CA Cmnty Redev Agy Tax Alloc Merged Cent Bus & Residential Ser C (AMBAC Insd)....... 5.000 08/01/28 2,555,783 7,000 California Edl Fac Auth Rev Univ Of The Pacific (MBIA Insd)..................................... 5.875 11/01/20 8,053,640 3,000 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien A (AMBAC Insd)....... 5.000 07/01/33 3,127,260 2,000 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien Ser A (FGIC Insd).... 5.000 07/01/29 2,084,840 1,050 California Spl Dist Assn Fin Corp Ctf Partn Pgm Ser DD (FSA Insd)............................... 5.625 01/01/27 1,154,202 1,250 California St (FGIC Insd)....................... 6.250 09/01/12 1,511,362 2,450 California St (FGIC Insd)....................... 5.000 10/01/14 2,651,341 2,385 California St (XLCA Insd)....................... 6.250 09/01/12 2,887,567 1,000 California St (XLCA Insd)....................... 5.000 10/01/28 1,033,920 1,200 California St Dept Transn Ctf Ser A Rfdg (MBIA Insd)........................................... 5.250 03/01/16 1,316,568 2,000 California St Dept Vet Affairs Ser A (AMBAC Insd)........................................... 5.300 12/01/21 2,135,240 2,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.500 05/01/16 2,261,500 1,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.375 05/01/18 1,108,340 2,500 California St Dept Wtr Res Pwr Supply Rev Rite Ser B (Var Rate Cpn) (MBIA Insd) (Acquired 9/8/03, Cost $2,709,650) (a).................... 9.270 05/01/21 2,972,525 1,000 California St Pub Wks Brd Dept Corrections Ser E Rfdg (XLCA Insd) (b)............................ 5.000 06/01/18 1,080,640 2,500 California St Pub Wks Brd Lease Dept Corrections Ten Admin Ser A (AMBAC Insd).................... 5.250 03/01/17 2,725,225 4,125 California St Pub Wks Brd Lease Rev CA St Univ Ser A Rfdg (AMBAC Insd)......................... 5.500 10/01/14 4,564,601 7,750 California St Rfdg (FGIC Insd).................. 5.000 02/01/23 7,965,295
6 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $1,000 California St Univ Rev & Colleges Systemwide Ser A (AMBAC Insd).................................. 5.375% 11/01/18 $ 1,113,630 2,000 California Statewide Cmntys Dev Auth Wtr Rev Pooled Fin Pgm Ser C (FSA Insd)................. 5.250 10/01/24 2,157,420 1,000 Carson, CA Redev Agy Redev Proj Area No 1 Tax Alloc (MBIA Insd)............................... 5.500 10/01/15 1,159,720 2,000 Castaic Lake Wtr Agy CA Ctf Partn Wtr Sys Impt Proj Ser A Rfdg (MBIA Insd)..................... 7.000 08/01/12 2,543,060 3,000 Castaic Lake Wtr Agy CA Rev Ctf Partn Ser A (MBIA Insd)..................................... 5.250 08/01/23 3,210,600 2,335 Chaffey, CA Uni High Sch Dist Ser B (FGIC Insd)........................................... 5.500 08/01/16 2,644,434 1,205 Channel Islands Beach, CA Cmnty Svcs Dist Ctf Partn CA Spl Dist Fin Proj BB (FSA Insd)........ 5.700 09/01/21 1,359,987 5,165 Corona, CA Redev Agy Tax Alloc Redev Proj Area Ser A Rfdg (FGIC Insd).......................... 6.250 09/01/13 5,368,346 1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA Insd)........................................... 5.000 06/01/21 1,054,390 1,300 Folsom Cordova, CA Uni Sch Dist Sch Fac Impt Dist No 2 Ser A (MBIA Insd)..................... 5.375 10/01/17 1,455,155 1,360 Folsom, CA Pub Fin Auth City Hall & Cmnty Ctr Rfdg (FSA Insd)................................. 5.000 10/01/16 1,489,431 1,480 Fontana, CA Redev Agy Tax Alloc Dwntwn Redev Proj Rfdg (MBIA Insd)........................... 5.000 09/01/21 1,548,065 650 Fresno, CA Jt Pwrs Fin Auth Ser A (FSA Insd).... 5.000 06/01/17 701,629 590 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)........................................... 5.900 08/01/17 714,006 630 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)........................................... 5.900 08/01/18 762,892 675 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)........................................... 5.900 08/01/19 817,681 720 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)........................................... 5.900 08/01/20 870,552 2,000 Glendale, CA Redev Agy Tax Ctr Glendale Redev Proj (MBIA Insd)................................ 5.250 12/01/20 2,191,800 2,425 Glendora, CA Pub Fin Auth Tax Alloc Proj No 1 Ser A (MBIA Insd)............................... 5.000 09/01/24 2,544,674 20,000 Grossmont, CA Uni High Sch Dist Ctf Partn (MBIA Insd)........................................... * 11/15/21 6,483,800 1,750 Hacienda La Puente, CA Uni Sch Dist Ser A (MBIA Insd)........................................... 5.500 08/01/20 1,950,777 1,250 Hemet, CA Uni Sch Dist Ctf Partn Nutrition Ctr Proj (FSA Insd)................................. 5.875 04/01/27 1,404,312 2,000 Imperial Irr Dist CA Ctf Partn Elec Sys Proj (FSA Insd)...................................... 5.250 11/01/23 2,166,660 1,950 Imperial Irr Dist CA Ctf Partn Wtr Sys Proj (AMBAC Insd).................................... 5.000 07/01/19 2,065,771 2,000 Inglewood, CA Redev Agy Tax Alloc Merged Redev Proj Ser A Rfdg (AMBAC Insd).................... 5.250 05/01/23 2,240,020
See Notes to Financial Statements 7 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $1,715 Irvine, CA Pub Fac & Infrastructure Ser B (AMBAC Insd)........................................... 5.000% 09/02/23 $ 1,769,486 2,250 La Mesa Spring Vly, CA Sch Dist Ser A (FGIC Insd)........................................... 5.000 08/01/26 2,344,005 2,000 La Quinta, CA Redev Agy Tax Alloc Redev Proj Area No 1 (AMBAC Insd).......................... 5.000 09/01/22 2,125,980 1,000 Livermore-Amador Vly Wtr Mgmt Agy CA Swr Rev Ser A (AMBAC Insd).................................. 5.250 08/01/16 1,108,180 1,000 Long Beach, CA Bond Fin Auth Lease Rev Rainbow Harbor Refin Proj Ser A (AMBAC Insd)............ 5.250 05/01/24 1,059,820 1,260 Long Beach, CA Bond Fin Auth Pub Lease Safety Fac Proj (AMBAC Insd)........................... 5.250 11/01/16 1,405,895 1,545 Long Beach, CA Bond Fin Auth Pub Lease Safety Fac Proj (AMBAC Insd)........................... 5.250 11/01/20 1,681,161 2,740 Los Angeles Cnty, CA Ctf Partn Antelope Vly Courthouse Ser A (AMBAC Insd)................... 5.750 11/01/16 3,165,440 1,000 Los Angeles Cnty, CA Ctf Partn Disney Pkg Proj Rfdg (AMBAC Insd)............................... 4.750 03/01/23 1,015,710 1,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop A First Tier Sr Ser C Rfdg (AMBAC Insd).... 5.000 07/01/23 1,037,670 1,235 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop C Second Tier Sr Ser A Rfdg (FGIC Insd).... 5.000 07/01/15 1,346,175 1,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop C Second Tier Sr Ser A Rfdg (FGIC Insd).... 5.000 07/01/16 1,084,100 1,265 Los Angeles Cnty, CA Schs Regionalized Business Svcs Ctf Partn Cap Apprec Pooled Fin Ser A (AMBAC Insd).................................... * 08/01/24 446,735 301 Los Angeles Cnty, CA Tran Comm Lease Rev Dia RR Lease Ltd (FSA Insd)............................ 7.375 12/15/06 304,648 1,975 Los Angeles, CA Ctf Partn Real Ppty Pgm Ser T (MBIA Insd)..................................... 5.000 02/01/19 2,103,178 2,380 Los Angeles, CA Mtg Rev FHA Security 8 Asstd Proj Ser A Rfdg (MBIA Insd)..................... 6.100 07/01/25 2,411,178 1,375 Los Angeles, CA Spl Assmt Landscaping & Ltg Dist No 96 Ser 1 (AMBAC Insd)........................ 5.000 03/01/21 1,450,763 1,000 Los Angeles, CA Uni Sch Dist 1997 Election Ser E (MBIA Insd)..................................... 5.500 07/01/17 1,131,470 2,860 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B (FSA Insd)........................................... 5.000 07/01/26 2,983,523 1,000 Lynwood, CA Uni Sch Dist 2002 Election Ser A (FSA Insd)...................................... 5.000 08/01/27 1,044,290 1,500 Modesto, CA Irr Dist Ctfs Partn Cap Impts Ser A (FSA Insd)...................................... 5.250 07/01/18 1,642,635 1,105 Monrovia, CA Fin Auth Lease Rev Hillside Wilderness Preserve (AMBAC Insd)................ 5.000 12/01/20 1,189,676
8 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $2,000 Montclair, CA Redev Agy Tax Redev Proj No V Rfdg (MBIA Insd)..................................... 5.000% 10/01/20 $ 2,127,360 1,000 Mount Pleasant, CA Elem Sch Dist 1998 Election Ser C (FSA Insd)................................ 5.500 03/01/26 1,094,060 1,570 Mountain View, CA Shoreline Tax Alloc Ser A (MBIA Insd)..................................... 5.250 08/01/16 1,740,408 370 M-S-R Pub Pwr Agy CA San Juan Proj Rev Adj Sub Lien Ser E (MBIA Insd).......................... 6.000 07/01/22 381,248 2,000 Natomas, CA Uni Sch Dist Rfdg (FGIC Insd)....... 5.250 09/01/16 2,217,580 1,250 North City West, CA Sch Fac Fin Auth Spl Tax Ser B Rfdg (FSA Insd)............................... 5.750 09/01/15 1,385,425 3,915 Oak Grove, CA Sch Dist 1995 Election (FGIC Insd)........................................... 5.250 08/01/25 4,126,410 1,000 Oakland, CA Uni Sch Dist Alameda Cnty (FSA Insd)........................................... 5.000 08/01/17 1,053,720 1,300 Oceanside, CA Ctf Partn Ser A Rfdg (AMBAC Insd)........................................... 5.200 04/01/23 1,394,484 1,930 Ontario, CA Redev Fin Auth Rev Proj No 1 Ctr City & Cimarron (MBIA Insd)..................... 5.250 08/01/15 2,152,510 3,025 Orange Cnty, CA Pub Fin Auth Lease Rev Juvenile Justice Ctr Fac Rfdg (AMBAC Insd)............... 5.375 06/01/17 3,384,552 5,000 Orange Cnty, CA Recovery Ctfs Partn Ser A (MBIA Insd)........................................... 5.800 07/01/16 5,522,250 1,340 Palm Springs, CA Fin Lease Rev Convention Ctr Proj Ser A Rfdg (MBIA Insd)..................... 5.250 11/01/19 1,459,796 1,000 Perris, CA Sch Dist Ctf Partn Rfdg (FSA Insd)... 6.100 03/01/16 1,023,870 2,020 Pomona, CA Pub Fin Auth Rev Merged Redev Proj Ser AD (MBIA Insd).............................. 5.000 02/01/15 2,192,407 1,110 Pomona, CA Pub Fin Auth Rev Merged Redev Proj Ser AD (MBIA Insd).............................. 5.000 02/01/16 1,202,086 1,360 Port Hueneme, CA Ctf Partn Cap Impt Pgm Rfdg (MBIA Insd)..................................... 6.000 04/01/19 1,643,111 1,055 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj (AMBAC Insd).................................... 5.375 06/15/20 1,159,930 3,000 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj Ser A (MBIA Insd)............................... 5.000 06/15/33 3,112,980 3,000 Rancho Cucamonga, CA Redev Agy Rancho Redev Proj (MBIA Insd)..................................... 5.375 09/01/25 3,203,820 1,680 Rancho, CA Wtr Dist Spl Tax Cmnty Fac Dist 883 Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/17 1,817,626 1,000 Redding, CA Elec Sys Rev Ctf Partn (Inverse Fltg) (Escrowed to Maturity) (MBIA Insd)........ 11.539 07/01/22 1,437,300 1,600 Redding, CA Jt Pwrs Auth Wtr Ser A Rfdg (AMBAC Insd)........................................... 5.000 06/01/21 1,697,280 1,400 Redding, CA Redev Agy Tax Alloc Canby Hilltop Cypress Redev Ser A (MBIA Insd)................. 5.000 09/01/23 1,481,298
See Notes to Financial Statements 9 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $2,000 Rialto, CA Spl Tax Cmnty Fac Dist 87-1 Rfdg (FSA Insd)........................................... 5.625% 09/01/18 $ 2,209,300 1,000 Riverside Cnty, CA Ctf Partn Historic Courthouse Proj (MBIA Insd)................................ 5.875 11/01/27 1,132,040 1,755 Rohnert Pk, CA Cmnty Dev Agy Tax Alloc Rohnert Redev Proj (MBIA Insd).......................... * 08/01/31 410,670 1,755 Rohnert Pk, CA Cmnty Dev Agy Tax Alloc Rohnert Redev Proj (MBIA Insd).......................... * 08/01/33 368,217 1,755 Rohnert Pk, CA Cmnty Dev Agy Tax Alloc Rohnert Redev Proj (MBIA Insd).......................... * 08/01/35 330,010 1,310 Rowland, CA Uni Sch Dist Ser A (FSA Insd)....... 5.500 09/01/20 1,460,820 1,000 Sacramento, CA City Fin Auth Rev Cap Impt (AMBAC Insd)........................................... 5.000 12/01/33 1,039,180 1,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec Ser A (MBIA Insd)............................... 6.400 09/01/18 1,014,240 3,000 San Francisco, CA City & Cnty George R Moscone Ctr Rfdg (FSA Insd)............................. 5.000 07/01/17 3,240,000 1,500 San Francisco, CA City & Cnty Redev Fin Auth Tax Alloc San Francisco Redev Proj Ser A (FSA Insd)........................................... 5.000 08/01/15 1,630,110 2,000 San Francisco, CA City & Cnty Second Ser Issue 26B (FGIC Insd)................................. 5.000 05/01/22 2,095,620 2,000 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd)..... 5.375 03/01/17 2,235,420 2,675 San Jose, CA Fin Auth Lease Rev Convention Ctr Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,879,263 1,000 San Leandro, CA Ctf Part Lib & Fire Stations Fin (AMBAC Insd).................................... 5.750 11/01/29 1,116,400 1,000 San Leandro, CA Jt Proj Area Fin (MBIA Insd).... 5.100 12/01/26 1,047,060 1,260 San Luis, CA Wtr Dists Rev Ctf Partn Cap Impt Proj Rfdg (AMBAC Insd).......................... 5.500 11/01/16 1,394,404 1,460 San Marcos, CA Redev Agy Tax Alloc (FSA Insd)... 5.375 08/01/25 1,560,536 2,000 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/20 2,196,520 2,065 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/21 2,257,644 1,000 Shasta, CA Jt Pwrs Fin Auth Cnty Admin Bldg Proj Ser A (MBIA Insd)............................... 5.250 04/01/22 1,082,310 1,000 South Gate, CA Pub Fin Auth South Gate Redev Proj No 1 (XLCA Insd)........................... 5.750 09/01/22 1,127,260 2,750 Southern CA Pub Pwr Transmission Rev Southn Transmission Sub Ser A Rfdg (FSA Insd).......... 5.250 07/01/16 3,061,685 1,135 Sweetwater, CA Auth Wtr Rev (FSA Insd).......... 5.250 04/01/15 1,261,553 1,195 Sweetwater, CA Auth Wtr Rev (FSA Insd).......... 5.250 04/01/16 1,321,993 2,150 Temecula, CA Redev Agy Tax Alloc Rev Temecula Redev Proj No 1 (MBIA Insd)..................... 5.125 08/01/27 2,227,400 1,000 University of CA Rev Gen Ser A (AMBAC Insd)..... 5.000 05/15/26 1,045,020
10 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $1,000 University of CA Rev Multi Purp Proj Ser F (FGIC Insd)........................................... 5.000% 09/01/16 $ 1,074,280 1,000 University of CA Rev Multi Purp Proj Ser M (FGIC Insd)........................................... 5.125 09/01/17 1,089,770 1,000 University of CA Rev Resh Fac Ser E (AMBAC Insd)........................................... 5.000 09/01/19 1,061,880 1,540 Vallejo City, CA Uni Sch Dist Ser A Rfdg (MBIA Insd)........................................... 5.900 02/01/20 1,849,001 1,390 Ventura Cnty, CA Ctf Partn Pub Fin Auth II (FSA Insd)........................................... 5.250 08/15/19 1,529,765 2,000 Ventura Cnty, CA Ctf Partn Pub Fin Auth Ser I (FSA Insd)...................................... 5.250 08/15/16 2,213,200 ------------ TOTAL LONG-TERM INVESTMENTS 99.1% (Cost $233,052,668)......................................................... 252,362,022 SHORT-TERM INVESTMENT 0.7% (Cost $1,800,000)........................................................... 1,800,000 ------------ TOTAL INVESTMENTS 99.8% (Cost $234,852,668)......................................................... 254,162,022 OTHER ASSETS IN EXCESS OF LIABILITIES 0.2%................................... 543,348 ------------ NET ASSETS 100.0%............................................................ $254,705,370 ============
* Zero coupon bond (a) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 1.17% on net assets. (b) Securities purchased on a when-issued or delayed delivery basis. AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 11 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2004 (Unaudited) ASSETS: Total Investments (Cost $234,852,668)....................... $254,162,022 Cash........................................................ 288,047 Receivables: Interest.................................................. 2,983,101 Fund Shares Sold.......................................... 240,826 Other....................................................... 125,053 ------------ Total Assets............................................ 257,799,049 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 1,250,296 Investments Purchased..................................... 1,087,883 Income Distributions...................................... 214,863 Distributor and Affiliates................................ 168,994 Investment Advisory Fee................................... 102,606 Trustees' Deferred Compensation and Retirement Plans........ 179,615 Accrued Expenses............................................ 89,422 ------------ Total Liabilities....................................... 3,093,679 ------------ NET ASSETS.................................................. $254,705,370 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $234,570,176 Net Unrealized Appreciation................................. 19,309,354 Accumulated Net Realized Gain............................... 514,321 Accumulated Undistributed Net Investment Income............. 311,519 ------------ NET ASSETS.................................................. $254,705,370 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $193,016,625 and 10,128,103 shares of beneficial interest issued and outstanding)............. $ 19.06 Maximum sales charge (3.25%* of offering price)......... .64 ------------ Maximum offering price to public........................ $ 19.70 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $46,242,511 and 2,423,955 shares of beneficial interest issued and outstanding)............. $ 19.08 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $15,446,234 and 811,042 shares of beneficial interest issued and outstanding)............. $ 19.04 ============
* On sales of $25,000 or more, the sales charge will be reduced. 12 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 6,277,547 ----------- EXPENSES: Investment Advisory Fee..................................... 604,662 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $238,428, $154,834 and $84,380, respectively)............................................. 477,642 Shareholder Services........................................ 79,299 Legal....................................................... 14,436 Trustees' Fees and Related Expenses......................... 11,964 Custody..................................................... 9,748 Other....................................................... 105,199 ----------- Total Expenses.......................................... 1,302,950 Less Credits Earned on Cash Balances.................... 675 ----------- Net Expenses............................................ 1,302,275 ----------- NET INVESTMENT INCOME....................................... $ 4,975,272 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 883,763 Futures................................................... (640,951) ----------- Net Realized Gain........................................... 242,812 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 16,847,748 End of the Period......................................... 19,309,354 ----------- Net Unrealized Appreciation During the Period............... 2,461,606 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 2,704,418 =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 7,679,690 ===========
See Notes to Financial Statements 13 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS continued Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 4,975,272 $ 10,073,099 Net Realized Gain.................................... 242,812 257,251 Net Unrealized Appreciation/Depreciation During the Period............................................. 2,461,606 (6,703,034) ------------ ------------ Change in Net Assets from Operations................. 7,679,690 3,627,316 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (3,634,508) (7,904,427) Class B Shares..................................... (724,292) (1,686,177) Class C Shares..................................... (254,328) (557,298) ------------ ------------ (4,613,128) (10,147,902) ------------ ------------ Distributions from Net Realized Gain: Class A Shares..................................... -0- (1,755,292) Class B Shares..................................... -0- (460,678) Class C Shares..................................... -0- (133,437) ------------ ------------ -0- (2,349,407) ------------ ------------ Total Distributions.................................. (4,613,128) (12,497,309) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... 3,066,562 (8,869,993) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 15,406,603 48,488,523 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 3,259,261 8,957,796 Cost of Shares Repurchased........................... (30,249,012) (53,753,503) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (11,583,148) 3,692,816 ------------ ------------ TOTAL DECREASE IN NET ASSETS......................... (8,516,586) (5,177,177) NET ASSETS: Beginning of the Period.............................. 263,221,956 268,399,133 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $311,519 and ($50,625), respectively)........................... $254,705,370 $263,221,956 ============ ============
14 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, -------------------------------------------- 2004 2003 2002 (c) 2001 2000 1999 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.............................. $18.84 $19.45 $18.64 $17.67 $17.28 $18.77 ------ ------ ------ ------ ------ ------ Net Investment Income............... .38 .74 .77 .81 .82 .83 Net Realized and Unrealized Gain/Loss......................... .20 (.44) .85 .94 .38 (1.45) ------ ------ ------ ------ ------ ------ Total from Investment Operations...... .58 .30 1.62 1.75 1.20 (.62) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............................ .36 .75 .78 .78 .81 .87 Distributions from Net Realized Gain.............................. -0- .16 .03 -0- -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions................... .36 .91 .81 .78 .81 .87 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.... $19.06 $18.84 $19.45 $18.64 $17.67 $17.28 ====== ====== ====== ====== ====== ====== Total Return (a)...................... 3.09%* 1.67% 9.01% 10.09% 7.20% -3.44% Net Assets at End of the Period (In millions)........................... $193.0 $195.4 $200.4 $174.9 $152.5 $162.0 Ratio of Expenses to Average Net Assets (b).......................... .89% .87% .87% .89% .98% .92% Ratio of Net Investment Income to Average Net Assets.................. 3.98% 3.93% 4.18% 4.43% 4.79% 4.52% Portfolio Turnover.................... 4%* 25% 32% 39% 52% 44%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 3.25% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended September 30, 2000. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 4.16% to 4.18%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. See Notes to Financial Statements 15 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, -------------------------------------------- 2004 2003 2002 (c) 2001 2000 1999 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.............................. $18.82 $19.44 $18.65 $17.69 $17.26 $18.76 ------ ------ ------ ------ ------ ------ Net Investment Income............... .34 .60 .63 .67 .68 .68 Net Realized and Unrealized Gain/Loss......................... .21 (.45) .84 .94 .43 (1.45) ------ ------ ------ ------ ------ ------ Total from Investment Operations...... .55 .15 1.47 1.61 1.11 (.77) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............................ .29 .61 .65 .65 .68 .73 Distributions from Net Realized Gain.............................. -0- .16 .03 -0- -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions................... .29 .77 .68 .65 .68 .73 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.... $19.08 $18.82 $19.44 $18.65 $17.69 $17.26 ====== ====== ====== ====== ====== ====== Total Return (a)...................... 2.92%(d)* 0.87% 8.16% 9.27% 6.63% -4.20% Net Assets at End of the Period (In millions)........................... $ 46.2 $ 49.8 $ 53.0 $ 47.7 $ 38.3 $ 45.3 Ratio of Expenses to Average Net Assets (b).......................... 1.46%(d) 1.62% 1.63% 1.65% 1.74% 1.68% Ratio of Net Investment Income to Average Net Assets.................. 3.40%(d) 3.18% 3.42% 3.67% 4.03% 3.76% Portfolio Turnover.................... 4%* 25% 32% 39% 52% 44%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 3%, charged on certain redemptions made within one year of purchase and declining to 0% after the fourth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on the Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended September 30, 2000. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 3.40% to 3.42%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect the refund of certain 12b-1 fees during the period. 16 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ----------------------------------------------- 2004 2003 2002 (C) 2001 2000 1999 ------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD............................. $18.82 $19.43 $18.64 $17.68 $17.26 $18.75 ------ ------ ------ ------ ------ ------ Net Investment Income.............. .30 .61 .64 .68 .68 .69 Net Realized and Unrealized Gain/Loss........................ .21 (.45) .83 .93 .42 (1.45) ------ ------ ------ ------ ------ ------ Total from Investment Operations..... .51 .16 1.47 1.61 1.10 (.76) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income........................... .29 .61 .65 .65 .68 .73 Distributions from Net Realized Gain............................. -0- .16 .03 -0- -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions.................. .29 .77 .68 .65 .68 .73 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD... $19.04 $18.82 $19.43 $18.64 $17.68 $17.26 ====== ====== ====== ====== ====== ====== Total Return (a)..................... 2.70%* 0.92%(d) 8.16% 9.27% 6.57% -4.15% Net Assets at End of the Period (In millions).......................... $ 15.4 $ 18.1 $ 15.0 $ 11.0 $ 6.6 $ 7.4 Ratio of Expenses to Average Net Assets (b)......................... 1.64% 1.62% 1.63% 1.65% 1.74% 1.69% Ratio of Net Investment Income to Average Net Assets................. 3.22% 3.20%(d) 3.41% 3.67% 4.03% 3.75% Portfolio Turnover................... 4%* 25% 32% 39% 52% 44%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1% charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended September 30, 2000. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 3.39% to 3.41%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (d) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .03%. See Notes to Financial Statements 17 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen California Insured Tax Free Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide only California investors with a high level of current income exempt from federal and California income taxes, with liquidity and safety of principal, primarily through investment in a diversified portfolio of insured California municipal securities. The Fund commenced investment operations on December 13, 1985. The distribution of the Fund's Class B Shares and Class C Shares commenced on April 30, 1993 and August 13, 1993, respectively. Effective November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2004, the Fund had $1,087,883 of when-issued and delayed delivery purchase commitment. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute 18 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax law which allow it to carry which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At September 30, 2003, the Fund had an accumulated capital loss carryforward for tax purposes of $29,472, which will expire on September 30, 2011. At March 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $234,735,729 ============ Gross tax unrealized appreciation........................... $ 19,466,313 Gross tax unrealized depreciation........................... (40,020) ------------ Net tax unrealized appreciation on investments.............. $ 19,426,293 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, and a portion of futures gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2003 was as follows:
2003 Distributions paid from: Ordinary income........................................... $ 58,761 Long-term capital gain.................................... 2,326,272 ---------- $2,385,033 ==========
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $6,520
F. INSURANCE EXPENSE The Fund typically invests in insured bonds. Any portfolio securities not specifically covered by a primary insurance policy are insured secondarily through the Fund's portfolio insurance policy. Insurance premiums are based on the daily balances of uninsured bonds in the portfolio of investments and are charged to expense on an accrual basis. The insurance policy guarantees the timely payment of principal and interest on the securities in the Fund's portfolio. G. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's custody fee was reduced by $675 as a result of credits earned on cash balances. 19 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $100 million.......................................... .500% Next $150 million........................................... .450% Next $250 million........................................... .425% Over $500 million........................................... .400%
For the six months ended March 31, 2004, the Fund recognized expenses of approximately $5,300 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under separate Accounting Services and Legal Services Agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $26,500 representing Van Kampen Investment Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $58,400 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $107,434 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2004. Appreciation/ depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 20 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2004, capital aggregated $175,018,735, $44,215,879 and $15,335,562 for Classes A, B and C, respectively. For the six months ended March 31, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 613,183 $ 11,693,687 Class B................................................... 130,105 2,457,703 Class C................................................... 65,846 1,255,213 ---------- ------------ Total Sales................................................. 809,134 $ 15,406,603 ========== ============ Dividend Reinvestment: Class A................................................... 136,137 $ 2,583,882 Class B................................................... 26,908 510,395 Class C................................................... 8,701 164,984 ---------- ------------ Total Dividend Reinvestment................................. 171,746 $ 3,259,261 ========== ============ Repurchases: Class A................................................... (993,018) $(18,825,322) Class B................................................... (379,702) (7,188,170) Class C................................................... (222,748) (4,235,520) ---------- ------------ Total Repurchases........................................... (1,595,468) $(30,249,012) ========== ============
At September 30, 2003, capital aggregated $179,566,488, $48,435,951 and $18,150,885 for Classes A, B and C, respectively. For the year ended September 30, 2003, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,661,438 $ 31,350,394 Class B................................................... 428,696 8,090,363 Class C................................................... 480,104 9,047,766 ---------- ------------ Total Sales................................................. 2,570,238 $ 48,488,523 ========== ============ Dividend Reinvestment: Class A................................................... 366,301 $ 6,890,766 Class B................................................... 83,899 1,577,306 Class C................................................... 26,042 489,724 ---------- ------------ Total Dividend Reinvestment................................. 476,242 $ 8,957,796 ========== ============ Repurchases: Class A................................................... (1,957,587) $(36,611,996) Class B................................................... (593,532) (11,117,759) Class C................................................... (320,896) (6,023,748) ---------- ------------ Total Repurchases........................................... (2,872,015) $(53,753,503) ========== ============
21 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996 and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2004 and the year ended September 30, 2003, 2,412 and 44,998 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2004 and the year ended September 30, 2003, no Class C Shares converted to Class A Shares. Classes B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed on most redemptions made within four years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 3.00% 1.00% Second...................................................... 2.50% None Third....................................................... 2.00% None Fourth...................................................... 1.00% None Fifth and Thereafter........................................ None None
For the six months ended March 31, 2004, Van Kampen as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $16,200 and CDSC on redeemed shares of approximately $41,300. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $9,198,093 and $27,843,907, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio, to manage the portfolio's effective yield, maturity and duration, or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the 22 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Summarized below are the different types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures on U.S. Treasury Bonds and Notes and typically closes the contract prior to delivery date. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). Transactions in futures contracts for the six months ended March 31, 2004, were as follows:
CONTRACTS Outstanding at September 30, 2003........................... 252 Futures Closed.............................................. (252) ---- Outstanding at March 31, 2004............................... -0- ====
B. INDEXED SECURITY An inverse floating rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. These instruments are identified in the portfolio of investments. 6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and 1.00% each of Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $0 and $0 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under 23 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2004 are payments retained by Van Kampen of approximately $142,200 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $24,800. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, certain officers of such affiliates and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the named investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser, certain affiliates of the Adviser and certain investment companies advised by the Adviser or its affiliates are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the Van Kampen funds; the funds, including the Fund, are also named as nominal defendants. The complaint in the derivative action alleges that defendants gave a proprietary sales force economic incentives to promote the sale of proprietary mutual funds and that they improperly failed to disclose these economic incentives. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley DW Inc. in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the Van Kampen funds, rescission of the management contracts for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary damages. This complaint will be coordinated with the consolidated complaint. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 24 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 25 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 41, 341, 541 CAI SAR 5/04 RN04-00395P-Y03/04 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Municipal Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2004. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. Income may subject certain individuals to the federal Alternative Minimum Tax (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/04
A SHARES B SHARES C SHARES since 8/01/90 since 8/24/92 since 8/13/93 - -------------------------------------------------------------------------------------------------- W/MAX. W/MAX. W/MAX. AVERAGE ANNUAL W/O SALES 4.75% SALES W/O SALES 4.00% SALES W/O SALES 1.00% SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 6.30% 5.92% 4.97% 4.97% 4.10% 4.10% 10-year 5.57 5.05 5.12 5.12 4.76 4.76 5-year 4.33 3.32 3.54 3.29 3.54 3.54 1-year 5.65 0.61 4.87 0.87 4.88 3.88 6-month 2.84 -2.04 2.46 -1.54 2.47 1.47 - -------------------------------------------------------------------------------------------------- 30-Day SEC Yield 3.08% 2.48% 2.48%
Past performance is no guarantee of future results and current performance may be lower or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit vankampen.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect their conversion of Class B shares into Class A shares six years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004 Van Kampen Municipal Income Fund is managed by the adviser's Municipal Fixed Income team. Current members of the team include James F. Willison, Managing Director; Joseph R. Arcieri, Executive Director; and Timothy D. Haney, Vice President.(1) MARKET CONDITIONS The state of the U.S. economy remained mixed over the six-month period under review. On the positive side, economic growth continued to be robust with Gross Domestic Product growth topping 4% in both quarters. While this strength in output has historically triggered fears of rising interest rates, yields remained low across the municipal curve. These low yields were partly the result of the continued low levels of observed inflation in the U.S. economy. Unfortunately, they also reflected continuing weakness in the job market, which remained soft throughout the period. The soft job numbers, coupled with persistently low inflation, led the Federal Open Market Committee (the Fed) to maintain its accommodative stance throughout the period. In keeping with the general trend for calendar 2003, the six months under review saw high levels of issuance as municipalities sought to take advantage of historically low interest rates. Many cities and states moved to reduce expenditures by refinancing existing debt and replacing it with lower-yielding bonds. In other cases, municipalities attempted to meet current and future funding needs by issuing new debt. Low interest rates also had an impact on the demand for municipal bonds. Retail and institutional investor activity slowed as holders of municipal bonds saw little reason to sell bonds purchased at higher yield levels and reinvest at lower yields. However, the period was marked by rising activity among non- traditional investors such as hedge funds and insurance companies seeking to take advantage of the attractiveness of municipal bonds relative to taxable securities. Additionally, investors' search for yield led to significant outperformance by lower-rated bonds with greater credit risk. Sectors such as health care, with a preponderance of lower-rated issues, performed particularly well. (1)Team members may change at any time without notice. 2 PERFORMANCE ANALYSIS The fund returned 2.84 percent for the six months ended March 31, 2004 (Class A shares, unadjusted for sales charge), underperforming its benchmark, the Lehman Brothers Municipal Bond Index. (See table below.) Our analysis of the economy and interest rates indicated that the next major movement in rates was likely to be upward, which we believed warranted a more defensive positioning. As a result, we chose to emphasize securities that provided sufficient return potential and were most likely to hold up well in a rising interest-rate environment. This approach led us to de-emphasize bonds from the long end of the curve given their high sensitivity to interest rates and low coupons; instead, we focused on securities with premium coupons from the intermediate segment of the market (15 to 22 years) in the belief that these bonds offered the most attractive risk/reward profile. While we maintained this strategy through the end of the period, investors seemed to prefer bonds with longer maturities, and our approach limited the fund's ability to participate in their gains. We also kept the fund's overall duration (a measure of interest-rate sensitivity) below that of the benchmark, with a particular underweight in the 5- to 10-year maturity range. We expect this area of the yield curve to underperform if the Fed begins to raise rates again. While we focused our purchases on intermediate bonds, we also took advantage of short-term relative-value opportunities on the long end of the market. We focused such trading in liquid, high-quality bonds in an effort to maximize liquidity. Our high-quality bias was reflected in the portfolio as a whole, which ended the period with 78.7 percent of its assets invested in securities rated AA or higher. We also maintained the portfolio's diversification over the reporting period. The fund's holdings were spread across a broad spectrum of municipal-bond market sectors in order to limit the risk of over-concentration in any one segment. At the end of the period, the portfolio's largest sector weightings were transportation at 14.7 percent, followed by general purpose at 12.8 percent and public education at 12.6 percent. We will continue to scour state and local markets across the country for attractive investment opportunities. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
- -------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 2.84% 2.46% 2.47% 3.12% - --------------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and an index definition. 3 TOP 5 SECTORS AS OF 3/31/04 RATINGS ALLOCATION AS OF 3/31/04 Transportation 14.7% AAA 64.9% General Purpose 12.8 AA 13.8 Public Education 12.6 A 3.4 Wholesale Electric 10.2 BBB 4.4 Water & Sewer 7.9 BB 0.8 B 0.3 TOP 5 STATES AS OF 3/31/04 CCC 0.0 New York 14.1% CC 0.3 New Jersey 10.7 NR 12.1 California 9.6 Texas 8.2 Illinois 8.2
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. All percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Ratings allocations based upon ratings as issued by Standard and Poor's. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- MUNICIPAL BONDS 98.9% ALABAMA 0.7% $1,865 Alabama St Univ Rev Gen Tuition & Fee Ser B (MBIA Insd)..................................... 5.250% 03/01/33 $ 1,976,881 2,930 Alabama Wtr Pollutn Ctl Auth Revolving Fd Ln Ser A (AMBAC Insd) (a).............................. 6.750 08/15/17 3,140,550 3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev Mobile Energy Svc Co Proj Rfdg (b) (c).......... 6.950 01/01/20 21 ------------ 5,117,452 ------------ ARIZONA 3.7% 8,685 Arizona Sch Fac Brd Ctf Ser B (FGIC Insd)....... 5.250 09/01/17 9,655,636 4,250 Maricopa Cnty, AZ Indl Dev Waste Mgmt Inc Proj............................................ 4.800 12/01/31 4,330,580 5,000 Phoenix, AZ Civic Impt Corp Amt Sr Lien Ser B (FGIC Insd)..................................... 5.250 07/01/32 5,194,550 2,500 Phoenix, AZ Indl Dev Auth Mtg Christian Care Apt Proj Ser A Rfdg................................. 6.500 01/01/26 2,573,700 500 Scottsdale, AZ Indl Dev Auth Rev First Mtg Westminster Vlg Ser A Rfdg...................... 8.250 06/01/15 548,790 1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/12 2,130,337 1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)......................... 6.125 09/01/17 1,997,940 ------------ 26,431,533 ------------ ARKANSAS 0.5% 1,400 Jackson Cnty, AR Hlthcare Fac Brd First Mtg Hosp Rev Newport Hosp & Clinic Inc................... 7.375 11/01/11 1,408,372 2,102 Maumelle, AR Dogwood Addition Prd Muni Ppty Owners Rfdg..................................... 7.500 03/01/06 2,090,279 ------------ 3,498,651 ------------ CALIFORNIA 9.5% 4,870 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec Sub Pub Impts Proj C (FSA Insd)................. * 09/01/20 2,198,074 305 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs 1st Lien A (FSA Insd)........... 5.250 07/01/20 334,835 5,000 California Infrastructure & Econ Dev Bk Rev Rites-PA-1202R (Inverse Fltg) (FSA Insd) (Acquired 09/10/03, Cost $5,484,100) (d) (h).... 9.159 07/01/11 5,978,200 10,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.500 05/01/16 11,307,500 5,000 California St Dept Wtr Res Pwr Ser A (XLCA Insd)........................................... 5.375 05/01/17 5,589,650 6,575 California St Dept Wtr Res Pwr Supply Rev Rites- PA-1201R (Inverse Fltg) (MBIA Insd) (Acquired 09/08/03, Cost $7,143,277) (d) (h).............. 9.159 05/01/11 7,771,979 2,640 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC Insd)........................................... * 09/01/13 1,570,958 5,430 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC Insd)........................................... * 09/01/14 3,016,365
6 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd)......................... * 01/15/17 $ 1,573,740 21,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg..................................... * 01/15/24 6,678,210 15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg..................................... * 01/15/30 3,280,350 5,500 Monterey Cnty, CA Ctf Part Master Plan Fing (MBIA Insd)..................................... 5.000% 08/01/32 5,672,920 6,695 San Francisco, CA City & Cnty Second Ser Issue 29 B Rfdg (FGIC Insd)........................... 5.125 05/01/20 7,223,972 5,000 West Contra Costa CA Uni Election of 2002 Ser B (FSA Insd)...................................... 5.000 08/01/26 5,208,900 ------------ 67,405,653 ------------ COLORADO 6.3% 2,840 Adams Cnty, CO Single Family Mtg Rev Ser A (Escrowed to Maturity).......................... 8.875 08/01/10 3,807,361 3,985 Adams Cnty, CO Single Family Mtg Rev Ser A (Escrowed to Maturity).......................... 8.875 08/01/12 5,556,764 5,000 Arapahoe Cnty, CO Wtr & Waste Proj Ser A (MBIA Insd)........................................... 5.125 12/01/32 5,246,800 5,000 Colorado Dept Trans Rev Rev Antic Nts Ser A (AMBAC Insd).................................... 5.250 12/15/16 5,607,350 1,000 Colorado Ed & Cultural Fac Impt Charter Sch Rfdg (XLCA Insd)..................................... 5.000 12/01/33 1,034,420 5,000 Colorado Springs, CO Utils Rev Sys Sub Lien Ser A Impt & Rfdg................................... 5.000 11/15/21 5,239,750 6,500 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B (MBIA Insd)..................................... * 09/01/20 2,940,795 15,000 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B (MBIA Insd)..................................... * 09/01/20 6,819,150 1,320 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/14 779,896 1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/15 790,869 1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/16 741,496 1,330 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/18 610,590 3,690 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity).................................... 11.500 09/01/12 5,809,425 ------------ 44,984,666 ------------ CONNECTICUT 1.8% 2,785 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg) (FGIC Insd) (Acquired 07/09/02, Cost $3,177,971) (d) (h)......................................... 9.580 08/15/15 3,493,086 2,950 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg) (FGIC Insd) (Acquired 07/09/02, Cost $3,323,232) (d) (h)......................................... 9.580 08/15/16 3,683,134
See Notes to Financial Statements 7 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- CONNECTICUT (CONTINUED) $2,530 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A-Private Placement (e)................... 6.400% 09/01/11 $ 2,746,391 2,470 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A-Private Placement (Prerefunded @ 09/01/07) (e)................................... 6.400 09/01/11 2,827,137 ------------ 12,749,748 ------------ DISTRICT OF COLUMBIA 1.2% 5,150 District Columbia Tax Incrmnt Gallary Place Proj (FSA Insd)...................................... 5.250 07/01/27 5,428,975 3,000 Metropolitan Washington DC Arpts Auth Sys Ser A (FGIC Insd)..................................... 5.250 10/01/32 3,110,490 ------------ 8,539,465 ------------ FLORIDA 6.3% 5,000 Broward Cnty, FL Arpt Sys Rev Ser J-I (AMBAC Insd)........................................... 5.250 10/01/26 5,206,900 9,000 Dade Cnty, FL Gtd Entitlement Rev Cap Apprec Ser A Rfdg (MBIA Insd).............................. * 02/01/18 4,289,490 5,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)........................................... 5.950 07/01/20 5,259,000 5,700 Florida St Brd of Ed Pub Ed Ser B............... 5.000 06/01/17 6,244,464 6,385 Lake Cnty, FL Sch Brd Ctf Part (AMBAC Insd)..... 5.375 07/01/16 7,136,642 500 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 523,285 595 Orange Cnty, FL Tourist Dev Tax Rev (Escrowed to Maturity) (AMBAC Insd).......................... 6.000 10/01/16 596,077 12,860 Orlando, FL Utils Commn Wtr Rfdg................ 5.250 10/01/19 14,062,667 675 Tampa Palms, FL Open Space & Tran Cmnty Dev Dist Rev Cap Impt Area 7 Proj........................ 8.500 05/01/17 689,971 818 Tampa Palms, FL Open Space & Tran Cmnty Dev Dist Rev Cap Impt Area 7 Proj........................ 7.500 05/01/18 850,213 ------------ 44,858,709 ------------ GEORGIA 1.2% 2,000 Fulton Cnty, GA Hsg Auth Multi-Family Hsg Rev Azalea Manor Proj Ser A (Acquired 02/18/98, Cost $2,000,000) (d)................................. 6.500 02/01/28 1,460,000 6,315 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd)............................... 5.250 11/01/17 7,012,365 ------------ 8,472,365 ------------ HAWAII 0.4% 1,475 Hawaii St Harbor Cap Impt Rev (FGIC Insd)....... 6.350 07/01/07 1,510,503 1,560 Hawaii St Harbor Cap Impt Rev (FGIC Insd)....... 6.400 07/01/08 1,597,627 ------------ 3,108,130 ------------
8 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- ILLINOIS 8.1% $5,000 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd)..................................... * 12/01/20 $ 2,238,650 3,000 Chicago, IL Lakefront Millennium Pkg Fac (MBIA Insd) (f)....................................... 0/5.650% 01/01/19 2,982,870 1,000 Chicago, IL Metro Wtr Reclamation Dist Gtr Chicago (Escrowed to Maturity).................. 7.000 01/01/11 1,223,950 8,050 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien C-2 Rfdg (XLCA Insd)....................... 5.250 01/01/34 8,376,508 5,100 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airls Proj Ser B (b) (c)........................ 5.200 04/01/11 1,581,000 900 Chicago, IL O'Hare Intl Arpt Spl United Airl Proj Ser A (b) (c).............................. 5.350 09/01/16 279,000 3,210 Chicago, IL Proj & Rfdg Ser C (FGIC Insd)....... 5.750 01/01/16 3,680,971 230 Chicago, IL Single Family Mtg Rev Ser A (GNMA Collateralized)................................. 7.000 09/01/27 231,191 125 Chicago, IL Tax Increment Alloc Santn Drain & Ship Canal Ser A................................ 7.375 01/01/05 125,956 1,000 Chicago, IL Tax Increment Alloc Santn Drain & Ship Canal Ser A................................ 7.750 01/01/14 1,051,640 2,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A..................................... 6.500 12/01/05 2,126,640 1,000 Cook Cnty, IL Cmnty College Dist No 508 Chicago Ctf Part (FGIC Insd)............................ 8.750 01/01/07 1,179,830 2,265 Cook Cnty, IL Cons High Sch Dist No 200 Oak Park (FSA Insd)...................................... * 12/01/11 1,730,347 5,000 Cook Cnty, IL Ser A (FGIC Insd)................. 5.500 11/15/31 5,449,600 1,500 Hodgkins, IL Tax Increment Ser A Rfdg........... 7.625 12/01/13 1,611,120 1,365 Huntley, IL Increment Alloc Rev Huntley Redev Proj Ser A...................................... 8.500 12/01/15 1,451,991 250 Illinois Dev Fin Auth Rev Cmnty Fac Clinic Altgeld Proj.................................... 8.000 11/15/06 219,165 5,000 Illinois St First Ser (FSA Insd)................ 5.250 12/01/21 5,409,900 9,250 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec McCormick Rfdg (MBIA Insd)... * 06/15/19 6,694,595 3,555 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec McCormick Ser A Rfdg (MBIA Insd)........................................... * 12/15/15 2,160,516 2,800 Regional Trans Auth IL Ser A (AMBAC Insd)....... 8.000 06/01/17 3,904,068 1,200 Saint Charles, IL Indl Dev Rev Tri-City Ctr Proj (Acquired 11/17/93, Cost $1,200,000) (d)........ 7.500 11/01/13 1,200,708 4,270 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd)........................................... * 12/01/15 2,590,481 ------------ 57,500,697 ------------
See Notes to Financial Statements 9 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- INDIANA 1.3% $2,500 Indiana Bd Bk Spl Pgm Hendricks Redev (Prerefunded @ 02/01/07) (LOC--Canadian Imperial Bank)........................................... 6.200% 02/01/23 $ 2,850,575 1,930 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj Ser A........................................... 7.125 06/01/34 1,789,766 550 Indianapolis, IN Loc Pub Impt Bd Bk Ser D (Escrowed to Maturity).......................... 6.750 02/01/14 681,191 140 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/11 81,575 140 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/12 75,565 135 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/13 67,500 130 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/14 60,211 130 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/15 55,775 135 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/16 53,654 225 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B....................................... * 06/30/17 82,836 3,295 Vigo Cnty, IN Elem Sch Bldg First Mtg Impt & Rfdg (FSA Insd)................................. 5.250 01/10/22 3,535,271 ------------ 9,333,919 ------------ IOWA 0.5% 640 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)................................. 6.000 07/01/07 718,746 2,400 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)................................. 5.750 07/01/17 2,654,280 ------------ 3,373,026 ------------ KANSAS 1.1% 6,600 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd)..................................... 5.625 09/01/13 7,637,586 ------------ LOUISIANA 0.3% 420 Louisiana St Hlth Ed Auth Rev Lambeth House Ser A Rfdg.......................................... 5.250 01/01/05 420,462 1,400 West Feliciana Parish, LA Pollutn Ctl Rev Gulf States Util Co Proj Ser A....................... 7.500 05/01/15 1,419,516 ------------ 1,839,978 ------------ MASSACHUSETTS 3.6% 7,500 Massachusetts St Fed Hwy Ser A.................. 5.750 06/15/14 8,758,350 3,500 Massachusetts St Hlth & Ed Fac Auth Rev (MBIA Insd)........................................... 5.000 07/01/13 3,598,000
10 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $1,500 Massachusetts St Indl Fin Agy Hillcrest Ed Ctr Inc Proj (Prerefunded @ 07/01/05)............... 8.450% 07/01/18 $ 1,642,035 5,355 Massachusetts St Indl Fin Agy Rev First Mtg Reeds Landing Proj.............................. 7.100 10/01/28 5,379,044 5,000 Massachusetts St Rol-R 143-Ser II (Inverse Fltg) (MBIA Insd) (Acquired 11/26/01, Cost $5,345,326) (d) (h)......................................... 9.330 11/01/16 6,407,250 ------------ 25,784,679 ------------ MICHIGAN 4.0% 875 Detroit, MI Loc Dev Fin Auth Tax Increment Ser C (Acquired 09/08/97, Cost $875,000) (d).......... 6.850 05/01/21 859,828 5,000 Detroit, MI Sew Disp Rev Sr Lien Ser A Rfdg (FGIC Insd)..................................... 5.125 07/01/31 5,215,350 1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Cent................................. 5.250 05/15/26 1,259,426 5,000 Michigan St Bldg Auth Rev Fac Prog Ser II....... 5.500 10/15/16 5,629,300 5,000 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (XLCA Insd).............................. 5.450 12/15/32 5,278,550 1,270 Michigan St Strategic Fd Detroit Edison Pollutn Ctl Ser B Rfdg.................................. 5.650 09/01/29 1,320,737 9,739 Michigan St Strategic Fd Ltd Oblig Rev Great Lakes Pulp & Fiber Proj (b) (g)................. 8.000 12/01/27 1,421,966 1,935 Michigan St Strategic Fd Solid Genesee Pwr Sta Proj Rfdg....................................... 7.500 01/01/21 1,665,842 5,000 Western Townships, MI Util Sew Rfdg (MBIA Insd)........................................... 5.250 01/01/16 5,522,300 ------------ 28,173,299 ------------ MISSOURI 1.6% 3,000 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 3,123,780 2,835 Kansas City, MO Port Auth Fac Riverfront Park Proj Ser A...................................... 5.750 10/01/06 2,894,393 3,935 Macon, MO Ctf Part (MBIA Insd).................. 5.250 08/01/17 4,327,870 595 Saint Louis, MO Tax Increment Rev Scullin Redev Area Ser A...................................... 10.000 08/01/10 714,440 ------------ 11,060,483 ------------ NEBRASKA 0.8% 5,435 Nebraska Pub Pwr Dist Rev Ser A (AMBAC Insd).... 5.000 01/01/18 5,875,452 ------------ NEW HAMPSHIRE 0.8% 1,555 New Hampshire Higher Ed & Hlth Fac Auth Rev..... 8.800 06/01/09 1,666,043 890 New Hampshire Higher Ed & Hlth Fac Auth Rev Daniel Webster College Issue Rfdg............... 6.100 07/01/09 952,718 795 New Hampshire St Business Fin Auth Elec Fac Rev Plymouth Cogeneration (Acquired 06/29/93, Cost $781,447) (d)................................... 7.750 06/01/14 797,298
See Notes to Financial Statements 11 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW HAMPSHIRE (CONTINUED) $1,000 New Hampshire St Business Fin Auth Rev Alice Peck Day Hlth Sys Ser A......................... 6.875% 10/01/19 $ 1,009,020 1,000 New Hampshire St Tpk Sys Rev Ser A Rfdg (FGIC Insd)........................................... 6.750 11/01/11 1,140,340 ------------ 5,565,419 ------------ NEW JERSEY 10.6% 2,000 Camden Cnty, NJ Impt Auth Lease Rev Dockside Refrig (Acquired 01/29/97, Cost $2,074,739) (b) (c) (d)......................................... 8.400 04/01/24 1,640,000 3,250 Landis, NJ Sew Auth Swr Rev (Inverse Fltg) (FGIC Insd) (h)....................................... 10.070 09/19/19 4,260,165 6,130 Middlesex Cnty, NJ Util Auth Swr Rev Ser A Rfdg (MBIA Insd)..................................... 6.250 08/15/10 7,085,054 9,725 New Jersey Econ Dev Auth Drivers Ser 365 (Inverse Fltg) (FGIC Insd) (Acquired 08/04/03, Cost $10,450,265) (d) (h)....................... 9.200 06/15/11 11,667,277 2,000 New Jersey Econ Dev Auth Holt Hauling & Warehsg Rev Ser G Rfdg (b) (c).......................... 8.400 12/15/15 1,640,000 1,900 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06)....................................... 8.500 11/01/16 2,244,945 350 New Jersey Econ Dev Auth Rev RWJ Hlthcare Corp (FSA Insd)...................................... 6.250 07/01/14 360,976 1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes (Prerefunded @ 07/01/05)........................ 7.500 07/01/20 1,094,480 1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes (Prerefunded @ 07/01/05)........................ 7.500 07/01/25 1,094,480 8,000 New Jersey Econ Dev Auth Sch Fac Constr Ser F (FGIC Insd)..................................... 5.250 06/15/17 8,929,760 755 New Jersey St Tpk Auth Tpk Rev Ser C (MBIA Insd)........................................... 6.500 01/01/16 938,405 2,725 New Jersey St Tpk Auth Tpk Rev Ser C (Escrowed to Maturity) (MBIA Insd)........................ 6.500 01/01/16 3,376,166 5,710 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt Ser A (AMBAC Insd).............................. 5.750 09/15/10 6,516,309 10,000 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt Ser B (Prerefunded @ 09/15/10) (AMBAC Insd)..... 6.000 09/15/15 11,867,300 5,500 New Jersey St Trans Tr Fd Auth Rols RR II R 236 (Inverse Fltg) (FSA Insd) (Acquired 07/30/03, Cost $6,391,317) (d) (h)........................ 9.810 06/15/20 6,799,980 5,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser C (FSA Insd)...................................... 5.500 06/15/16 5,698,550 ------------ 75,213,847 ------------ NEW YORK 14.0% 10,000 Nassau Cnty, NY Interim Fin Auth Ser A (Prerefunded @ 11/15/10)........................ 5.750 11/15/14 11,651,900 5,000 New York City Ser A............................. 7.000 08/01/07 5,606,450 21,860 New York City Ser B (MBIA Insd)................. 5.875 08/01/15 25,449,412 1,420 New York City Ser D............................. 8.000 02/01/05 1,498,001
12 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $5,000 New York City Ser D (MBIA Insd)................. 5.200% 08/01/14 $ 5,523,800 5,000 New York City Transitional Drivers Ser 307 (Inverse Fltg) (AMBAC Insd) (Acquired 11/06/02, Cost $5,439,826) (d) (h)........................ 9.120 08/01/19 5,933,450 2,285 New York St Dorm Auth Rev Mental Hlth Ser A..... 5.750 02/15/11 2,528,695 10 New York St Dorm Auth Rev Mental Hlth Ser A (Prerefunded @ 02/15/07)........................ 5.750 02/15/11 11,307 2,275 New York St Dorm Auth Rev Mental Hlth Svc Fac Ser A........................................... 5.750 02/15/12 2,517,629 5 New York St Dorm Auth Rev Mental Hlth Svc Fac Ser A (Prerefunded @ 02/15/07).................. 5.750 02/15/12 5,654 2,500 New York St Energy Resh & Dev Auth Gas Fac Rev (Inverse Fltg) (h).............................. 11.387 04/01/20 3,207,875 3,000 New York St Energy Resh & Dev Auth Gas Fac Rev Brooklyn Union Gas Ser B (Inverse Fltg) (h)..... 12.504 07/01/26 3,645,630 2,000 New York St Energy Resh & Dev Auth Pollutn Ctl Rev Niagara Mohawk Pwr Corp Ser A Rfdg (FGIC Insd)........................................... 7.200 07/01/29 2,067,400 10,725 New York St Environmental Fac Rev Fds-2nd Resolution...................................... 5.000 06/15/20 11,488,084 2,000 New York St Twy Auth Svc Ctl Rol-R 142 Ser II (Inverse Fltg) (Acquired 11/26/01, Cost $2,109,732) (d) (h)............................. 9.280 04/01/16 2,569,880 3,000 New York St Twy Auth Svc Ctl Rol-R 142 Ser II (Inverse Fltg) (Acquired 11/26/01, Cost $3,102,316) (d) (h)............................. 9.280 04/01/18 3,854,820 1,200 Port Auth NY & NJ Cons 95th Ser................. 6.125 07/15/22 1,227,240 10,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg... 5.000 11/15/22 10,525,200 ------------ 99,312,427 ------------ NORTH CAROLINA 1.3% 8,700 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 9,505,794 ------------ OHIO 0.1% 1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd Part Proj Rfdg (AMBAC Insd)..................... 6.375 04/01/29 1,042,270 ------------ OKLAHOMA 0.1% 520 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class B (GNMA Collateralized)......................... 7.997 08/01/18 552,157 ------------ OREGON 2.5% 5,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd)........................................... 5.250 07/01/22 5,405,500 1,000 Port Morrow, OR Pollutn Ctl Portland Gen A Rfdg............................................ 5.200 05/01/33 1,063,510 10,000 Portland, OR Swr Sys Rev Ser A (FGIC Insd)...... 5.750 08/01/18 11,470,000 ------------ 17,939,010 ------------
See Notes to Financial Statements 13 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- PENNSYLVANIA 1.6% $5,000 Chester Cnty, PA Hlth & Ed Fac Auth Hlth Sys Rev (AMBAC Insd).................................... 5.650% 05/15/20 $ 5,120,350 740 Lehigh Cnty, PA Indl Dev Auth Rev Rfdg.......... 8.000 08/01/12 734,480 5,250 Philadelphia, PA Auth Indl Ser B (FSA Insd)..... 5.500 10/01/16 5,869,133 ------------ 11,723,963 ------------ RHODE ISLAND 0.5% 1,490 Rhode Island St Econ Dev Corp Rev............... 7.250 07/01/10 1,502,233 2,000 Rhode Island St Hlth & Ed Bldg Higher Ed Johnson & Wales Rfdg (XLCA Insd)........................ 5.375 04/01/19 2,213,300 ------------ 3,715,533 ------------ SOUTH CAROLINA 0.1% 1,070 Piedmont Muni Pwr Agy SC Elec Rev............... 5.000 01/01/25 1,036,349 ------------ SOUTH DAKOTA 0.1% 1,000 South Dakota St Hlth & Ed Fac Auth Rev Huron Regl Med Ctr.................................... 7.250 04/01/20 1,023,350 ------------ TENNESSEE 1.1% 4,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg (MBIA Insd)..................................... 7.750 07/01/29 5,241,200 2,000 Springfield, TN Hlth & Ed Jesse Holman Jones Hosp Proj (Prerefunded @ 04/01/06).............. 8.500 04/01/24 2,311,040 ------------ 7,552,240 ------------ TEXAS 8.1% 1,955 Bell Cnty, TX Indl Dev Corp Solid Waste Disposal Rev............................................. 7.600 12/01/17 682,158 500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev St. Luke's Lutheran Hosp (Escrowed to Maturity)..... 7.000 05/01/21 651,755 4,000 Brazos River Auth TX Pollutn Ctl Rev Adj Elec Co Proj Ser C Rfdg................................. 5.750 05/01/36 4,337,840 90 Coastal Wtr Auth TX Conveyance Sys Rev (Escrowed to Maturity) (AMBAC Insd)....................... 6.250 12/15/17 90,171 5,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser A Rfdg (FGIC Insd).............................. 5.500 11/01/31 5,199,750 7,350 Grapevine Colleyville Indpt Sch Dist TX (PSFG Insd)........................................... * 08/15/11 5,674,641 10,000 Houston, TX Hotel Occupancy Tax Convtn & Entertnmnt Ser B (AMBAC Insd)................... 5.750 09/01/14 11,635,600 7,500 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (FSA Insd) (Acquired 10/20/99, Cost $7,623,805) (d) (h)............................. 10.389 05/15/14 9,816,375 6,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (FSA Insd) (Acquired 10/20/99, Cost $6,312,134) (d) (h)............................. 10.389 05/15/15 8,143,438
14 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $3,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (FSA Insd) (Acquired 10/20/99, Cost $3,254,875) (d) (h)............................. 10.389% 05/15/16 $ 4,234,588 2,000 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj................................... 7.200 01/01/21 1,980,520 500 Texas Gen Svc Cmnty Part Int Office Bldg & Land Acquisition Proj................................ 7.000 08/01/19 507,330 500 Texas Gen Svc Cmnty Part Int Office Bldg & Land Acquisition Proj................................ 7.000 08/01/24 507,165 659 Texas Gen Svc Cmnty Part Lease Purch Ctf........ 7.500 02/15/13 670,637 2,575 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev Coll Ser C Rfdg (Inverse Fltg) (GNMA Collateralized) (h)............................. 12.552 07/02/24 2,757,696 625 Texas St Higher Ed Coordinating Brd College Student Ln Rev.................................. 7.849 10/01/25 625,969 ------------ 57,515,633 ------------ UTAH 2.0% 1,340 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (b)............................................. 7.800 09/01/15 420,425 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (b)............................................. 8.000 09/01/20 313,750 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (b)............................................. 7.800 09/01/25 313,750 11,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg... 6.150 02/15/12 13,001,890 50 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A1 (FHA Gtd)....................................... 7.100 07/01/14 51,869 65 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A2 (FHA Gtd)....................................... 7.200 01/01/27 67,222 ------------ 14,168,906 ------------ VERMONT 0.1% 1,000 Vermont Ed & Hlth Bldg Fing Agy Rev Bennington College Proj.................................... 6.625 10/01/29 1,014,220 ------------ WASHINGTON 2.2% 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg............................................ 5.500 07/01/17 5,647,000 8,000 King Cnty, WA Sch Dist No 411 (FGIC Insd)....... 5.250 12/01/20 8,731,760 1,250 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev (FGIC Insd)............................... 7.125 07/01/16 1,618,213 ------------ 15,996,973 ------------ WEST VIRGINIA 0.8% 1,500 West Virginia St Hosp Fin Auth Hosp Rev Bears & Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 1,505,310 4,000 West Virginia St Hosp Fin Auth Hosp Rev Bears & Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 4,014,320 ------------ 5,519,630 ------------
See Notes to Financial Statements 15 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- WISCONSIN 0.0% $ 75 Wisconsin St Hlth & Ed Fac Auth Rev Hess Mem Hosp Assn (ACA Insd)............................ 7.200% 11/01/05 $ 78,530 ------------ TOTAL INVESTMENTS 98.9% (Cost $663,162,372)........................................................ 704,221,742 OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%.................................. 7,777,654 ------------ NET ASSETS 100.0%........................................................... $711,999,396 ============
* Zero coupon bond (a) All or a portion of these securities have been physically segregated in connection with open futures contracts. (b) Non-income producing security. (c) This borrower has filed for protection in federal bankruptcy court. (d) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 12.1% of net assets. (e) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (f) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (g) Payment-in-kind security. (h) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Trust to enhance the yield of the portfolio. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FHA--Federal Housing Administration FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. PSFG--Permanent School Fund Guaranty XLCA--XL Capital Assurance Inc. 16 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2004 (Unaudited) ASSETS: Total Investments (Cost $663,162,372)....................... $704,221,742 Receivables: Interest.................................................. 9,935,151 Investments Sold.......................................... 580,029 Fund Shares Sold.......................................... 379,171 Other....................................................... 180,165 ------------ Total Assets............................................ 715,296,258 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 965,378 Income Distributions...................................... 801,484 Distributor and Affiliates................................ 477,560 Investment Advisory Fee................................... 297,715 Variation Margin on Futures............................... 262,484 Custodian Bank............................................ 87,198 Trustees' Deferred Compensation and Retirement Plans........ 233,198 Accrued Expenses............................................ 171,845 ------------ Total Liabilities....................................... 3,296,862 ------------ NET ASSETS.................................................. $711,999,396 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $703,271,454 Net Unrealized Appreciation................................. 39,888,552 Accumulated Undistributed Net Investment Income............. 560,697 Accumulated Net Realized Loss............................... (31,721,307) ------------ NET ASSETS.................................................. $711,999,396 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $639,511,914 and 42,814,834 shares of beneficial interest issued and outstanding)............. $ 14.94 Maximum sales charge (4.75%* of offering price)......... .75 ------------ Maximum offering price to public........................ $ 15.69 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $55,421,285 and 3,715,136 shares of beneficial interest issued and outstanding)............. $ 14.92 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $17,066,197 and 1,145,558 shares of beneficial interest issued and outstanding)............. $ 14.90 ============
* On sales of $100,000 or more, the sales charge will be reduced. See Notes to Financial Statements 17 VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................. $19,251,527 ----------- EXPENSES: Investment Advisory Fee..................................... 1,754,459 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $807,323, $284,565 and $85,987, respectively)............................................. 1,177,875 Shareholder Services........................................ 234,265 Legal....................................................... 234,256 Custody..................................................... 26,781 Trustees' Fees and Related Expenses......................... 13,501 Other....................................................... 204,202 ----------- Total Expenses............................................ 3,645,339 Less Credits Earned on Cash Balances...................... 529 ----------- Net Expenses.............................................. 3,644,810 ----------- NET INVESTMENT INCOME....................................... $15,606,717 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $(3,369,967) Futures................................................... (1,418,973) ----------- Net Realized Loss........................................... (4,788,940) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 30,747,521 End of the Period: Investments............................................. 41,059,370 Futures................................................. (1,170,818) ----------- 39,888,552 ----------- Net Unrealized Appreciation During the Period............... 9,141,031 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 4,352,091 =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $19,958,808 ===========
18 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 15,606,717 $ 33,414,534 Net Realized Gain/Loss............................... (4,788,940) 11,327,363 Net Unrealized Appreciation/Depreciation During the Period............................................. 9,141,031 (21,838,216) ------------ ------------- Change in Net Assets from Operations................. 19,958,808 22,903,681 ------------ ------------- Distributions from Net Investment Income: Class A Shares..................................... (13,877,227) (30,423,796) Class B Shares..................................... (1,001,321) (2,325,118) Class C Shares..................................... (303,276) (700,757) ------------ ------------- Total Distributions.................................. (15,181,824) (33,449,671) ------------ ------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... 4,776,984 (10,545,990) ------------ ------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 24,263,731 127,051,831 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 10,199,179 22,094,872 Cost of Shares Repurchased........................... (61,109,535) (184,959,736) ------------ ------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (26,646,625) (35,813,033) ------------ ------------- TOTAL DECREASE IN NET ASSETS......................... (21,869,641) (46,359,023) NET ASSETS: Beginning of the Period.............................. 733,869,037 780,228,060 ------------ ------------- End of the Period (Including accumulated undistributed net investment income of $560,697 and $135,804, respectively)............................ $711,999,396 $ 733,869,037 ============ =============
See Notes to Financial Statements 19 VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, -------------------------------------------------- 2004 (a) 2003 (a) 2002 (c) 2001 2000 1999 ---------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $14.84 $15.03 $14.56 $14.06 $14.50 $15.99 ------ ------ ------ ------ ------ ------ Net Investment Income.......... .33 .67 .71 .74 .79 .82 Net Realized and Unrealized Gain/Loss.................... .09 (.19) .46 .49 (.42) (1.46) ------ ------ ------ ------ ------ ------ Total from Investment Operations..................... .42 .48 1.17 1.23 .37 (.64) Less Distributions from Net Investment Income.............. .32 .67 .70 .73 .81 .85 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD......................... $14.94 $14.84 $15.03 $14.56 $14.06 $14.50 ====== ====== ====== ====== ====== ====== Total Return (b)................. 2.84%* 3.31% 8.35% 8.93% 2.69% -4.25% Net Assets at End of the Period (In millions).................. $639.5 $658.5 $696.4 $701.5 $688.3 $777.5 Ratio of Expenses to Average Net Assets......................... .93% .88% .87% .83% .89% .88% Ratio of Interest Expense to Average Net Assets............. N/A N/A N/A N/A .01% .17% Ratio of Net Investment Income to Average Net Assets............. 4.38% 4.53% 4.89% 5.16% 5.58% 5.34% Portfolio Turnover............... 5%* 46% 49% 31% 45% 116%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses by $.01 and increase the ratio of net investment income to average net assets from 4.85% to 4.89%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. N/A=Not Applicable. 20 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ----------------------------------------------- 2004 (a) 2003 (a) 2002 (c) 2001 2000 1999 ------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $14.82 $15.02 $14.54 $14.05 $14.49 $ 15.98 ------ ------ ------ ------ ------ ------- Net Investment Income.......... .27 .56 .60 .63 .68 .71 Net Realized and Unrealized Gain/Loss.................... .09 (.20) .48 .48 (.42) (1.47) ------ ------ ------ ------ ------ ------- Total from Investment Operations..................... .36 .36 1.08 1.11 .26 (.76) Less Distributions from Net Investment Income.............. .26 .56 .60 .62 .70 .73 ------ ------ ------ ------ ------ ------- NET ASSET VALUE, END OF THE PERIOD......................... $14.92 $14.82 $15.02 $14.54 $14.05 $ 14.49 ====== ====== ====== ====== ====== ======= Total Return (b)................. 2.46%* 2.48% 7.64% 8.06% 1.90% -4.95% Net Assets at End of the Period (In millions).................. $ 55.4 $ 58.4 $ 65.0 $ 66.6 $ 69.5 $ 106.6 Ratio of Expenses to Average Net Assets......................... 1.68% 1.63% 1.62% 1.59% 1.67% 1.63% Ratio of Interest Expense to Average Net Assets............. N/A N/A N/A N/A .01% .17% Ratio of Net Investment Income to Average Net Assets............. 3.63% 3.78% 4.13% 4.40% 4.86% 4.57% Portfolio Turnover............... 5%* 46% 49% 31% 45% 116%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses by $.01 and increase the ratio of net investment income to average net assets from 4.09% to 4.13%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. N/A=Not Applicable. See Notes to Financial Statements 21 VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, -------------------------------------------------- 2004 (a) 2003 (a) 2002 (c) 2001 2000 1999 ---------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $14.80 $15.00 $14.52 $14.04 $14.48 $15.96 ------ ------ ------ ------ ------ ------ Net Investment Income.......... .27 .56 .60 .63 .68 .70 Net Realized and Unrealized Gain/Loss.................... .09 (.20) .48 .47 (.42) (1.45) ------ ------ ------ ------ ------ ------ Total from Investment Operations..................... .36 .36 1.08 1.10 .26 (.75) Less Distributions from Net Investment Income.............. .26 .56 .60 .62 .70 .73 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD......................... $14.90 $14.80 $15.00 $14.52 $14.04 $14.48 ====== ====== ====== ====== ====== ====== Total Return (b)................. 2.47%* 2.48% 7.65% 8.00% 1.91% -4.90% Net Assets at End of the Period (In millions).................. $ 17.1 $ 17.0 $ 18.8 $ 17.4 $ 13.8 $ 17.5 Ratio of Expenses to Average Net Assets......................... 1.68% 1.63% 1.62% 1.62% 1.66% 1.63% Ratio of Interest Expense to Average Net Assets............. N/A N/A N/A N/A .01% .17% Ratio of Net Investment Income to Average Net Assets............. 3.63% 3.78% 4.13% 4.37% 4.84% 4.55% Portfolio Turnover............... 5%* 46% 49% 31% 45% 116%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses by $.01 and increase the ratio of net investment income to average net assets from 4.09% to 4.13%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. N/A=Not Applicable. 22 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Municipal Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Fund commenced investment operations on August 1, 1990. The distribution of the Fund's Class B and Class C shares commenced on August 24, 1992 and August 13, 1993, respectively. Effective November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management (the "Adviser"). The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2004, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. 23 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset these losses against any future realized capital gains. At September 30, 2003, the Fund had an accumulated capital loss carryforward for tax purposes of $28,396,676 which will expire between September 30, 2008 and September 30, 2010. At March 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $662,914,635 ============ Gross tax unrealized appreciation........................... $ 56,707,456 Gross tax unrealized depreciation........................... (15,400,349) ------------ Net tax unrealized appreciation investments................. $ 41,307,107 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2003 was as follows:
2003 Distribution paid from: Ordinary Income........................................... $239,149 Long-term capital gain.................................... -- -------- $239,149 ========
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $141,325
F. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's custody fee was reduced by $529 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, the Adviser will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
For the six months ended March 31, 2004, the Fund recognized expenses of approximately $15,500 representing legal services provided by Skadden, Arps, Slate, 24 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $53,400 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS) an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $182,800 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and, to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of approximately $156,700 are included in "Other" assets on the Statements of Assets and Liabilities at March 31, 2004. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 25 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2004, capital aggregated $628,396,348, $57,332,238 and $17,542,868 for Classes A, B and C, respectively. For the six months ended March 31, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,424,459 $ 21,208,426 Class B................................................... 99,672 1,484,724 Class C................................................... 106,317 1,570,581 ---------- ------------ Total Sales................................................. 1,630,448 $ 24,263,731 ========== ============ Dividend Reinvestment: Class A................................................... 629,679 $ 9,380,991 Class B................................................... 41,277 614,088 Class C................................................... 13,734 204,100 ---------- ------------ Total Dividend Reinvestment................................. 684,690 $ 10,199,179 ========== ============ Repurchases: Class A................................................... (3,612,271) $(53,839,317) Class B................................................... (364,434) (5,432,006) Class C................................................... (123,590) (1,838,212) ---------- ------------ Total Repurchases........................................... (4,100,295) $(61,109,535) ========== ============
At September 30, 2003, capital aggregated $651,646,248, $60,665,432 and $17,606,399 for Classes A, B and C, respectively. For the year ended September 30, 2003, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 7,801,000 $ 114,651,871 Class B................................................... 503,655 7,411,147 Class C................................................... 338,633 4,988,813 ----------- ------------- Total Sales................................................. 8,643,288 $ 127,051,831 =========== ============= Dividend Reinvestment: Class A................................................... 1,375,257 $ 20,229,463 Class B................................................... 96,732 1,421,035 Class C................................................... 30,289 444,374 ----------- ------------- Total Dividend Reinvestment................................. 1,502,278 $ 22,094,872 =========== ============= Repurchases: Class A................................................... (11,127,622) $(163,537,726) Class B................................................... (988,417) (14,485,338) Class C................................................... (474,542) (6,936,672) ----------- ------------- Total Repurchases........................................... (12,590,581) $(184,959,736) =========== =============
26 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2004 and year ended September 30, 2003, 22,388 and 155,348 Class B Shares converted to Class A Shares, respectively and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2004 and year ended September 30, 2003, 2,500 and 0 Class C Shares automatically convert to Class A Shares and are shown in the above table as sales of Class A Shares and repurchases of Class C Shares. Class B and C Shares are offered without a front end sales charges, but are subject to a contingent deferred sale charge (CDSC). The CDSC will be imposed on most redemptions made within six years of the purchase for Class B and one year of the purchase for Class C as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 4.00% 1.00% Second...................................................... 3.75% None Third....................................................... 3.50% None Fourth...................................................... 2.50% None Fifth....................................................... 1.50% None Sixth....................................................... 1.00% None Seventh and Thereafter...................................... None None
For the six months ended March 31, 2004, Van Kampen as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $39,700 and CDSC on redeemed shares of approximately $28,800. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $32,048,795 and $45,997,684, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. 27 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio, to manage the portfolio's effective yield, maturity and duration, or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a future contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the future contract. Summarized below are the different types of derivative financial instruments used by the Fund. FUTURES CONTRACT A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in futures on U.S. Treasury Notes. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2004, were as follows:
CONTRACTS Outstanding at September 30, 2003........................... 276 Futures Opened.............................................. 885 Futures Closed.............................................. (537) ---- Outstanding at March 31, 2004............................... 624 ====
The futures contracts outstanding as of March 31, 2004, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 10-Year Futures June 2004 (Current Notional Value of $115,406 per contract).................. 109 $ (259,337) U.S. Treasury Notes 5-Year Futures June 2004 (Current Notional Value of $113,563 per contract).................. 515 (911,481) --- ----------- 624 $(1,170,818) === ===========
6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans"). The Plans govern payments for: the 28 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to 0.25% of Class A average daily net assets and 1.00% each for Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $2,928,300 and $182,800 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in these fees for the six months ended March 31, 2004, are payments retained by Van Kampen of approximately $35,400 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $234,800. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, certain officers of such affiliates and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the named investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser, certain affiliates of the Adviser and certain investment companies advised by the Adviser or its affiliates are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the Van Kampen funds; the funds, including the Fund, are also named as nominal defendants. The complaint in the derivative action alleges that defendants gave a proprietary sales force economic incentives to promote the sale of proprietary mutual funds and that they improperly failed to disclose these economic incentives. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley DW Inc. in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the Van Kampen funds, rescission of the management contracts for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary damages. This complaint will be coordinated with the consolidated complaint. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 29 VAN KAMPEN MUNICIPAL INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 30 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 49, 349, 549 MIF SAR 5/04 RN04-00365P-Y03/04 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Intermediate Term Municipal Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2004. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. Income may subject certain individuals to the federal Alternative Minimum Tax (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
PERFORMANCE SUMMARY as of 3/31/04
A SHARES B SHARES C SHARES since 5/28/1993 since 5/28/1993 since 10/19/1993 - ------------------------------------------------------------------------------------------ W/MAX. W/MAX. W/MAX. 3.25% 3.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 5.71% 5.38% 5.29% 5.29% 4.45% 4.45% 10-year 5.84 5.50 5.38 5.38 5.08 5.08 5-year 4.74 4.05 4.08 4.08 3.99 3.99 1-year 4.68 1.28 3.90 0.90 3.92 2.92 6-month 2.35 -0.96 2.06 -0.94 2.07 1.07 - ------------------------------------------------------------------------------------------ 30-Day SEC Subsidized Yield 2.60% 1.93% 1.94% 30-Day SEC Yield 2.50 1.83 1.84 - ------------------------------------------------------------------------------------------
Past performance is no guarantee of future results and current performance may be lower or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit vankampen.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Average annual total return with sales charges includes payment of the maximum sales charge of 3.25 percent for Class A shares, a contingent deferred sales charge of 3.00 percent for Class B shares (in year one and declining to zero after year four), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect its conversion into Class A shares six years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. The subsidized SEC yields reflect some or all of the expenses that the adviser had voluntarily waived. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004 Van Kampen Intermediate Term Municipal Income Fund is managed by the adviser's Municipal Fixed Income team, which includes Timothy D. Haney, Vice President.(1) MARKET CONDITIONS The state of the U.S. economy remained mixed over the six-month period under review. On the positive side, economic growth continued to be robust with Gross Domestic Product growth topping 4% in both quarters. While this strength in output has historically triggered fears of rising interest rates, yields remained persistently low across the municipal curve. These low yields were partly the result of the continued low levels of observed inflation in the U.S. economy. Unfortunately, they also reflected continuing weakness in the job market, which remained soft throughout the period. The soft job numbers, coupled with persistently low inflation, led the Federal Open Market Committee (the Fed) to maintain its accommodative stance throughout the period. In keeping with the general trend for calendar 2003, the six months under review saw high levels of issuance as municipalities sought to take advantage of historically low interest rates. Many cities and states moved to reduce expenditures by refinancing existing debt and replacing it with lower-yielding bonds. In other cases, municipalities attempted to meet current and future funding needs by issuing new debt. Low interest rates also had an impact on the demand for municipal bonds. Retail and institutional investor activity slowed as holders of municipal bonds saw little reason to sell bonds purchased at higher yield levels and reinvest at lower yields. However, the period was marked by rising activity among non- traditional investors such as hedge funds and insurance companies seeking to take advantage of the attractiveness of municipal bonds relative to taxable securities. Additionally, investors' search for yield led to significant outperformance by lower-rated bonds with greater credit risk. Sectors such as health care, with a preponderance of lower-rated issues, performed particularly well. 2 PERFORMANCE ANALYSIS The fund returned 2.35 percent for the six months ended March 31, 2004 (Class A shares, unadjusted for sales charge), underperforming its benchmark, the Lehman Brothers Municipal Bond Index. (See table below.) The period saw a flattening of the yield curve, as short rates rose slightly and long rates declined. As a result, bonds in the longest segment of the yield curve performed most strongly. The fund's investment strategy is focused on the more conservative, intermediate-maturity portion of the yield curve, limiting the fund's ability to participate in this trend. This was the key driver of the fund's underperformance relative to its benchmark index, which is broader and includes a significant weighting of more-volatile, long-maturity bonds. The most significant change in the fund's portfolio was in its aggregate credit quality. With interest rates at such low levels, we focused our purchases on well-researched securities in the middle tiers of the investment-grade market that our analysis indicated offered the most attractive return potential. As a result of this activity, the fund's holdings of securities rated A and AA climbed by 10 percent, while its holdings of AAA rated bonds declined. Our interest-rate strategy during the period was driven by our assessment of the economy and interest rates. With yields at such low levels, we believed that the next movement in interest rates was likely to be upward. This led us to position the portfolio defensively by purchasing securities with attractive total-return potential that are likely to perform well in the event of rising interest rates. Many of these securities were intermediate bonds with premium coupons and attractive structural characteristics. At the same time, we de-emphasized the five- to 10-year portion of the curve, which our analysis showed was likely to suffer most in a rising interest-rate environment. We also maintained the portfolio's diversification over the reporting period. The fund's holdings were spread across the full spectrum of municipal-bond market sectors in order to limit the risk of over-concentration in any one segment. At the end of the period, the portfolio's largest sector weightings were general purpose at 16.2 percent, followed by public building at 14.0 percent and public education at 13.1 percent. We will continue to scour state and local markets across the country for attractive investment opportunities. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
- ---------------------------------------------------------- LEHMAN BROTHERS MUNICIPAL BOND CLASS A CLASS B CLASS C INDEX 2.35% 2.06% 2.07% 3.12% - ----------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and an index definition. 3 TOP 5 SECTORS AS OF 3/31/04 RATINGS ALLOCATION AS OF 3/31/04 General Purpose 16.2% AAA/Aaa 65.4% Public Building 14.0 AA/Aa 10.4 Public Education 13.1 A/A 13.3 Retail Elec/Gas/Telephone 10.2 BBB/Baa 4.2 Airport 8.5 B/B 0.1 Non-Rated 6.6 TOP 5 STATES AS OF 3/31/04 Missouri 8.4% California 8.1 Ohio 6.1 Pennsylvania 6.1 Florida 5.9
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. All percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Ratings allocations based upon ratings as issued by Standard and Poor's, Moody's and Fitch's. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- MUNICIPAL BONDS 97.0% ALABAMA 1.4% $1,260 Dothan Houston Cnty, AL Arpt Auth (MBIA Insd)... 5.400% 12/01/15 $ 1,377,571 305 West Jefferson Cnty, AL Amusement & Pub Park Auth (Prerefunded @ 12/01/06)................... 7.500 12/01/08 342,558 ------------ 1,720,129 ------------ ARIZONA 0.6% 30 Maricopa Cnty, AZ Indl Dev Auth Sr Living Fac Rev Christian Care Mesa Inc Proj A.............. 7.250 04/01/05 30,446 675 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 709,492 ------------ 739,938 ------------ ARKANSAS 0.9% 1,000 Arkansas St Fed Hwy Grant Antic Ser A........... 5.500 08/01/06 1,093,000 ------------ CALIFORNIA 7.9% 175 California Edl Fac Auth Rev Pacific Grad Sch.... 6.950 11/01/07 186,366 1,000 California St (AMBAC Insd) (a).................. 6.400 09/01/08 1,175,280 1,500 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.375 05/01/18 1,662,510 3,000 Los Angeles, CA Uni Sch Dist Elec of 1997 Ser F (FSA Insd)...................................... 5.000 07/01/17 3,279,630 1,715 Modesto, CA Irr Dist Ctfs Partn Cap Impts Ser A Rfdg (MBIA Insd)................................ 5.000 07/01/16 1,879,057 1,100 Santa Clara, CA Elec Rev Sub Ser A (MBIA Insd)........................................... 5.250 07/01/20 1,203,147 ------------ 9,385,990 ------------ COLORADO 5.0% 1,750 Adams & Arapahoe Cntys, CO Sch Dist 28 Ser C.... 5.200 12/01/11 1,928,972 1,000 Boulder Cnty, CO Dev Rev Univ Corp for Atmospheric Resh (AMBAC Insd)................... 5.000 09/01/19 1,076,570 210 Colorado Hlth Fac Auth Rev Sr Living Fac Eaton Ter Ser A....................................... 6.800 07/01/09 213,202 1,560 Colorado Springs, CO Utils Rev Sys Sub Lien Impt Ser A........................................... 5.000 11/15/19 1,678,997 1,000 Denver, CO City & Cnty Arpt Rev Ser A........... 7.400 11/15/04 1,034,060 ------------ 5,931,801 ------------ CONNECTICUT 4.5% 145 Mashantucket Western Pequot Tribe, 144A--Private Placement (Escrowed to Maturity) (b)............ 6.500 09/01/06 161,924 565 New Britain, CT................................. 5.000 04/15/04 565,847 560 New Britain, CT................................. 5.000 04/15/05 582,310 305 New Haven, CT Indl Fac Rev Adj Govt Ctr Thermal Energies........................................ 7.250 07/01/09 299,123 1,000 New Haven, CT Ser B Rfdg (FGIC Insd)............ 5.250 11/01/11 1,150,180
6 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CONNECTICUT (CONTINUED) $1,250 New Haven, CT Ser B Rfdg (FGIC Insd)............ 5.375% 11/01/12 $ 1,446,612 1,000 Regional Sch Dist No 16 CT Rfdg (AMBAC Insd).... 5.000 03/15/13 1,135,430 ------------ 5,341,426 ------------ DISTRICT OF COLUMBIA 0.9% 1,000 District of Columbia Rev Friendship Pub Charter Sch Inc (ACA Insd).............................. 5.000 06/01/13 1,078,920 ------------ FLORIDA 5.7% 2,000 Broward Cnty, FL Arpt Sys Rev Ser E Rfdg (MBIA Insd) (a)....................................... 5.375 10/01/13 2,191,700 1,150 Florida Hsg Fin Agy Hsg Maitland Club Apts Ser B-1 (AMBAC Insd)................................ 6.750 08/01/14 1,193,091 500 Highlands Cnty, FL Hlth Facs Hosp Adventist Health.......................................... 3.350 11/15/32 511,205 190 Lee Cnty, FL Indl Dev Auth Econ Rev Encore Nursing Ctr Part Rfdg........................... 8.125 12/01/07 193,741 115 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg....................... 8.125 07/01/06 118,448 250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 261,643 1,825 Orange Cnty, FL Sch Brd Ctfs Partn Ser A (AMBAC Insd)........................................... 5.250 08/01/14 2,069,824 300 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj Rfdg (Escrowed to Maturity)..................... 7.125 11/01/06 324,579 ------------ 6,864,231 ------------ GEORGIA 1.5% 1,355 De Kalb Cnty, GA Hsg Auth Multi-Family Hsg Rev North Hill Apts Proj Rfdg (FNMA Collateralized) (Variable Rate Coupon).......................... 6.625 01/01/25 1,397,764 360 Forsyth Cnty, GA Hosp Auth Rev Antic Ctfs GA Baptist Hlthcare Sys Proj (Escrowed to Maturity)....................................... 6.000 10/01/08 395,582 ------------ 1,793,346 ------------ ILLINOIS 3.3% 150 Bedford Park, IL Tax Increment 71st & Cicero Proj Rfdg....................................... 7.000 01/01/06 154,205 1,325 Bedford Park, IL Wtr Rev Ser B (ACA Insd)....... 6.000 12/15/08 1,474,407 125 Chicago, IL Tax Increment Alloc Santn Drain & Ship Canal Ser A................................ 7.375 01/01/05 125,956 250 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A..................................... 6.500 12/01/05 265,830 545 Clay Cnty, IL Hosp Rev.......................... 5.500 12/01/10 540,166 135 Huntley, IL Spl Svc Area No 7 Spl Tax........... 6.000 03/01/09 144,432
See Notes to Financial Statements 7 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 225 Peoria, IL Spl Tax Weaverridge Spl Svc Area..... 7.625% 02/01/08 $ 237,447 1,000 Round Lake Beach, IL Tax........................ 4.650 12/15/13 1,032,090 ------------ 3,974,533 ------------ INDIANA 2.3% 1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg (AMBAC Insd).................................... 5.500 01/01/18 1,113,830 1,400 Indiana Bd Bk Spl Prog Hendricks Redev Ser B (Prerefunded @ 02/01/07)........................ 6.000 02/01/12 1,588,622 ------------ 2,702,452 ------------ KANSAS 2.3% 500 Burlington, KS Envrn Impt Rev................... 4.750 09/01/15 534,910 1,000 Shawnee Cnty, KS Sch Dist 501 Topeka............ 5.000 02/01/20 1,061,450 320 Wyandotte Cnty, KS City KS Univ Brd of Public Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/11 361,040 710 Wyandotte Cnty, KS City KS Univ Brd of Public Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/12 789,548 ------------ 2,746,948 ------------ KENTUCKY 0.9% 1,000 Louisville & Jefferson Cnty, KY Ser C (FSA Insd)........................................... 5.500 07/01/17 1,099,130 ------------ LOUISIANA 1.2% 235 Louisiana Hsg Fin Agy Rev Multi-Family Hsg Plantation Ser A................................ 7.200 01/01/06 234,394 1,065 Louisiana Loc Govt Envir Pkg Facs Garage Proj Ser A (AMBAC Insd).............................. 5.000 10/01/12 1,182,182 ------------ 1,416,576 ------------ MARYLAND 0.6% 625 Maryland St Economic Dev Corp Univ MD College Park Proj....................................... 5.750 06/01/13 692,269 ------------ MASSACHUSETTS 0.3% 95 Massachusetts St Indl Fin Agy East Boston Neighborhood Proj............................... 7.250 07/01/06 94,752 295 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/1998, Cost $295,000) (c)............................................. 6.200 06/01/08 286,976 ------------ 381,728 ------------ MICHIGAN 3.3% 1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/18 1,106,020 1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/20 1,093,190 335 John Tolfree Hlth Sys Corp MI Mtg Rev Rfdg...... 5.450 09/15/06 344,273 1,000 Michigan Higher Ed Facs Auth Ltd Oblig Kalamazoo College Proj Rfdg............................... 5.250 12/01/16 1,078,950 250 Michigan St Strategic Fd Ltd Oblig Rev United Waste Sys Proj.................................. 5.200 04/01/10 270,153 ------------ 3,892,586 ------------
8 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- MINNESOTA 0.5% $ 480 Dakota Cnty, MN Hsg & Redev Auth Multi-Family Hsg Rev Affordable Hsg View Pointe Proj......... 6.000% 11/01/09 $ 474,163 130 Minneapolis, MN Multi-Family Rev Hsg Belmont Apts Proj....................................... 7.000 11/01/06 131,482 ------------ 605,645 ------------ MISSOURI 8.1% 1,500 Kansas City, MO Arpt Rev Genl Impt Ser A (FSA Insd)........................................... 7.000 09/01/12 1,546,545 1,350 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 1,405,701 1,000 Macon, MO Ctfs Partn (MBIA Insd)................ 5.250 08/01/17 1,099,840 2,125 O' Fallon, MO Ctfs Partn (MBIA Insd)............ 5.375 02/01/18 2,347,828 2,000 St. Charles, MO Ctfs Partn Ser B................ 5.500 05/01/18 2,136,160 1,000 St. Louis, MO Arpt Rev Arpt Dev Prog Ser A (MBIA Insd)........................................... 5.500 07/01/09 1,137,470 ------------ 9,673,544 ------------ MONTANA 0.4% 400 Crow Fin Auth, MT Tribal Purp Rev (Acquired 12/11/1997, Cost $400,000) (c).................. 5.400 10/01/07 429,140 ------------ NEBRASKA 2.4% 1,545 Nebraska Pub Pwr Dist Rev Ser B (AMBAC Insd).... 5.000 01/01/15 1,698,125 1,100 Omaha, NE Rfdg.................................. 5.000 11/01/16 1,208,988 ------------ 2,907,113 ------------ NEW JERSEY 4.5% 500 Camden Cnty, NJ Impt Auth Lease Rev Kaighn Pt Marine Terminal A (d) (e) (f)................... 7.375 06/01/07 31,000 1,400 Essex Cnty, NJ Impt Auth Lease Gtd Cnty Correctional Fac Proj (FGIC Insd)............... 5.750 10/01/30 1,584,058 460 Middlesex Cnty, NJ Impt Auth Street Student Hsg Proj Ser A...................................... 2.500 08/15/06 465,308 400 New Jersey Econ Dev Auth First Mtg Winchester Ser A Rfdg...................................... 3.000 11/01/06 402,848 130 New Jersey Econ Dev Auth Rev Sr Mtg Arbor Glen Proj Ser A (Escrowed to Maturity)............... 8.000 05/15/04 131,096 800 New Jersey Hlthcare Fac Fin Auth Rev Christ Hosp Group Issue (Connie Lee Insd)................... 7.000 07/01/06 893,656 670 New Jersey St Edl Facs Auth Fairleigh Dickinson Univ Ser D (ACA Insd)........................... 5.000 07/01/05 699,473 455 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.500 02/15/16 515,369 565 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.600 02/15/17 643,038 ------------ 5,365,846 ------------
See Notes to Financial Statements 9 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- NEW MEXICO 1.5% $1,000 Jicarilla, NM Apache Nation Rev Ser A (Acquired 10/23/2003, Cost $1,020,034) (c)................ 5.500% 09/01/23 $ 1,055,550 700 Jicarilla, NM Apache Nation Ser A (Acquired 10/23/2003, Cost $726,360) (c).................. 4.000 09/01/08 735,280 ------------ 1,790,830 ------------ NEW YORK 5.5% 285 Brookhaven, NY Indl Dev Agy Sr Residential Hsg Rev Woodcrest Estates Fac Ser A................. 5.875 12/01/09 297,395 1,000 Long Island Pwr Auth NY Elec Gen Ser C.......... 5.500 09/01/17 1,103,080 1,000 Metropolitan Trans Auth NY Svc Contract Ser B (MBIA Insd)..................................... 5.500 07/01/14 1,174,250 265 New Jersey Economic Dev Auth First Mtg Winchester Ser A Rfdg........................... 2.600 11/01/05 266,065 500 New York City Ser A............................. 7.000 08/01/07 560,645 1,000 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg Ser A (Prerefunded @ 02/15/05) (AMBAC Insd)..... 6.200 08/15/05 1,064,350 5 Niagara Falls, NY Pub Impt (MBIA Insd).......... 6.900 03/01/20 5,123 1,000 Tobacco Settlement Fin Corp Asset Backed Ser C............................................... 5.250 06/01/13 1,078,320 1,000 United Nations Dev Corp NY Rev Ser A Rfdg....... 5.250 07/01/19 1,035,840 ------------ 6,585,068 ------------ NORTH CAROLINA 3.4% 1,040 Buncombe Cnty, NC Met Swr Dist Rfdg (MBIA Insd)........................................... 5.000 07/01/18 1,126,798 630 North Carolina Eastn Mun Pwr Agy Pwr Sys Rev Ser D............................................... 6.450 01/01/14 718,257 1,000 North Carolina Infrastructure Correctional Fac Proj............................................ 5.000 10/01/16 1,095,360 1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 1,092,620 ------------ 4,033,035 ------------ OHIO 5.9% 2,130 Akron, OH Impt (FGIC Insd)...................... 5.000 12/01/18 2,314,394 500 Athens Cnty, OH Hosp Facs Rev & Impt O' Bleness Mem Ser A Rfdg.................................. 6.250 11/15/13 516,040 110 Cleveland-Cuyahoga Cnty, OH Port Auth Rev Dev-Port Cleveland Bd Fd Ser B.................. 6.500 05/15/05 110,319 500 Dayton, OH Spl Facs Rev Afco Cargo Day LLC Proj............................................ 6.000 04/01/09 469,105 1,160 Sugarcreek, OH Loc Sch Dist Sch Impt Rfdg (MBIA Insd)........................................... 5.250 12/01/18 1,291,474 1,210 Toledo, OH Swr Sys Rev (AMBAC Insd)............. 5.000 11/15/18 1,314,363 1,000 University of Cincinnati Gen Ser C (FGIC Insd)........................................... 5.000 06/01/18 1,082,840 ------------ 7,098,535 ------------ OKLAHOMA 1.4% 1,500 University of Oklahoma Rev Multiple Fac (MBIA Insd)........................................... 5.000 06/01/19 1,620,960 ------------
10 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- OREGON 3.3% $2,575 Emerald Peoples Util Dist OR Ser A Rfdg (FSA Insd)........................................... 5.250% 11/01/16 $ 2,888,970 1,000 Port Morrow, OR Pollutn Ctl Portland Gen A Rfdg............................................ 5.200 05/01/33 1,063,510 ------------ 3,952,480 ------------ PENNSYLVANIA 5.9% 1,320 Canon McMillan Sch Dist PA Ser A Rfdg (MBIA Insd)........................................... 5.000 12/15/15 1,465,042 900 Philadelphia, PA Gas Wks Rev Third Ser (FSA Insd)........................................... 5.000 08/01/10 1,012,752 2,000 Philadelphia, PA Redev Auth Rev Neighborhood Trans A (FGIC Insd)............................. 5.500 04/15/16 2,269,000 2,070 York Cnty, PA Sch Technology (FGIC Insd)........ 5.375 02/15/16 2,315,978 ------------ 7,062,772 ------------ RHODE ISLAND 2.5% 1,835 Rhode Island St Cons Cap Dev Ln Ser A (Prerefunded @ 08/01/04)........................ 5.000 08/01/12 1,877,627 1,000 Rhode Island St Econ Dev Grant Antic RI Dept Trans Ser A (FSA Insd).......................... 5.000 06/15/15 1,106,760 ------------ 2,984,387 ------------ SOUTH CAROLINA 1.9% 1,020 Berkeley Cnty, SC Impt & Rfdg (FSA Insd)........ 5.000 09/01/17 1,113,993 1,065 Lexington, SC Wtr & Swr Rev & Impt Comb Ser A Rfdg (MBIA Insd)................................ 5.000 04/01/14 1,167,975 ------------ 2,281,968 ------------ TENNESSEE 1.6% 1,050 Franklin, TN Spl Sch Dist Cap Apprec (FSA Insd)........................................... * 06/01/15 668,094 1,105 Gatlinburg, TN Pub Bldg Auth Rfdg (AMBAC Insd)........................................... 5.750 12/01/11 1,303,646 ------------ 1,971,740 ------------ TEXAS 1.6% 1,000 Austin, TX Util Sys Rev Comb Ser A Rfdg (MBIA Insd)........................................... 5.375 11/15/05 1,018,300 500 Brazos River Auth TX Pollutn Ctl Rev Elec Proj Ser C Rfdg (Variable Rate Coupon)............... 5.750 05/01/36 542,230 300 San Antonio, TX Hsg Fin Corp Multi-Family Hsg Rev Beverly Oaks Arpt Proj Ser A................ 7.500 02/01/10 302,199 ------------ 1,862,729 ------------ UTAH 0.1% 110 Utah St Hsg Fin Agy Single Family Mtg Mezz Ser A (FHA/VA Gtd).................................... 7.150 07/01/12 114,114 ------------ VIRGINIA 1.4% 500 Pittsylvania Cnty, VA Indl Dev Auth Rev Exempt Fac Ser A (Acquired 04/15/1997, Cost $511,382) (c)............................................. 7.450 01/01/09 496,850 1,000 Portsmouth, VA Rfdg (FSA Insd).................. 5.000 07/01/15 1,120,430 ------------ 1,617,280 ------------
See Notes to Financial Statements 11 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- WEST VIRGINIA 1.3% $1,500 West Virginia St Hosp Fin Auth (MBIA Insd)...... 6.100% 01/01/18 $ 1,505,310 ------------ WISCONSIN 1.2% 1,415 Milwaukee Cnty, WI Arpt Rev Ser A (AMBAC Insd)........................................... 5.000 12/01/17 1,488,424 ------------ TOTAL LONG-TERM INVESTMENTS 97.0% (Cost $111,667,680)....................................................... 115,805,923 SHORT-TERM INVESTMENT 0.8% (Cost $1,000,000)......................................................... 1,000,000 ------------ TOTAL INVESTMENTS 97.8% (Cost $112,667,680)....................................................... 116,805,923 OTHER ASSETS IN EXCESS OF LIABILITIES 2.2%................................. 2,645,263 ------------ NET ASSETS 100.0%.......................................................... $119,451,186 ============
* Zero coupon bond (a) All or a portion of these securities have been physically segregated in connection with open futures contracts. (b) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (c) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 2.5% of net assets. (d) Non-income producing security. (e) This borrower has filed for protection in federal bankruptcy court. (f) Security is in default. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FHA/VA--Federal Housing Administration/Department of Veterans Affairs FNMA--Federal National Mortgage Association FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. 12 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2004 (Unaudited) ASSETS: Total Investments (Cost $112,667,680)....................... $116,805,923 Cash........................................................ 17,495 Receivables: Interest.................................................. 1,672,788 Fund Shares Sold.......................................... 1,103,468 Investments Sold.......................................... 365,000 Other....................................................... 115,319 ------------ Total Assets............................................ 120,079,993 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 139,077 Distributor and Affiliates................................ 86,343 Income Distributions...................................... 81,195 Variation Margin on Futures............................... 54,734 Investment Advisory Fee................................... 40,602 Trustees' Deferred Compensation and Retirement Plans........ 155,009 Accrued Expenses............................................ 71,847 ------------ Total Liabilities....................................... 628,807 ------------ NET ASSETS.................................................. $119,451,186 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $115,468,688 Net Unrealized Appreciation................................. 3,894,145 Accumulated Undistributed Net Investment Income............. 46,484 Accumulated Net Realized Gain............................... 41,869 ------------ NET ASSETS.................................................. $119,451,186 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $75,345,452 and 7,005,878 shares of beneficial interest issued and outstanding)............. $ 10.75 Maximum sales charge (3.25%* of offering price)......... .36 ------------ Maximum offering price to public........................ $ 11.11 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $22,588,629 and 2,095,767 shares of beneficial interest issued and outstanding)............. $ 10.78 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $21,517,105 and 2,005,722 shares of beneficial interest issued and outstanding)............. $ 10.73 ============
* On sales of $25,000 or more, the sales charge will be reduced. See Notes to Financial Statements 13 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................... $2,600,888 ---------- EXPENSES: Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $92,560, $117,434 and $105,859, respectively)............................................. 315,853 Investment Advisory Fee..................................... 296,981 Legal....................................................... 13,542 Trustees' Fees and Related Expenses......................... 9,298 Custody..................................................... 5,619 Other....................................................... 130,358 ---------- Total Expenses.......................................... 771,651 Investment Advisory Fee Reduction....................... 59,396 Less Credits Earned on Cash Balances.................... 260 ---------- Net Expenses............................................ 711,995 ---------- NET INVESTMENT INCOME....................................... $1,888,893 ========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 689,426 Futures................................................... (830,503) ---------- Net Realized Loss........................................... (141,077) ---------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 2,900,450 End of the Period: Investments............................................. 4,138,243 Futures................................................. (244,098) ---------- 3,894,145 ---------- Net Unrealized Appreciation During the Period............... 993,695 ---------- NET REALIZED AND UNREALIZED GAIN............................ $ 852,618 ========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,741,511 ==========
14 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 ------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................. $ 1,888,893 $ 3,398,661 Net Realized Gain/Loss................................ (141,077) 1,078,053 Net Unrealized Appreciation/Depreciation During the Period.............................................. 993,695 (1,143,711) ------------ ------------ Change in Net Assets from Operations.................. 2,741,511 3,333,003 ------------ ------------ Distributions from Net Investment Income: Class A Shares...................................... (1,259,282) (2,298,933) Class B Shares...................................... (311,065) (666,166) Class C Shares...................................... (281,477) (558,258) ------------ ------------ (1,851,824) (3,523,357) ------------ ------------ Distributions from Net Realized Gain: Class A Shares...................................... (559,168) (246,892) Class B Shares...................................... (168,772) (92,417) Class C Shares...................................... (151,088) (78,490) ------------ ------------ (879,028) (417,799) ------------ ------------ Total Distributions................................... (2,730,852) (3,941,156) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... 10,659 (608,153) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................. 22,098,618 65,586,619 Net Asset Value of Shares Issued Through Dividend Reinvestment........................................ 1,987,895 2,827,927 Cost of Shares Repurchased............................ (20,121,564) (36,079,223) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.... 3,964,949 32,335,323 ------------ ------------ TOTAL INCREASE IN NET ASSETS.......................... 3,975,608 31,727,170 NET ASSETS: Beginning of the Period............................... 115,475,578 83,748,408 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $46,484 and $9,415, respectively)....................................... $119,451,186 $115,475,578 ============ ============
See Notes to Financial Statements 15 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, -------------------------------------------- 2004 2003 2002 (b) 2001 2000 1999 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $10.76 $10.86 $10.42 $10.14 $10.22 $10.73 ------ ------ ------ ------ ------ ------ Net Investment Income............ .18 .38 .42 .49 .46 .47 Net Realized and Unrealized Gain/Loss...................... .07 (.03) .44 .23 (.05) (.48) ------ ------ ------ ------ ------ ------ Total from Investment Operations... .25 .35 .86 .72 .41 (.01) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .18 .40 .42 .43 .49 .50 Distributions from Net Realized Gain........................... .08 .05 -0- .01 -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions................ .26 .45 .42 .44 .49 .50 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $10.75 $10.76 $10.86 $10.42 $10.14 $10.22 ====== ====== ====== ====== ====== ====== Total Return* (a).................. 2.35%** 3.33% 8.48% 7.19% 4.13% -0.10% Net Assets at End of the Period (In millions)........................ $ 75.3 $ 70.1 $ 53.5 $ 29.1 $ 26.6 $ 29.5 Ratio of Expenses to Average Net Assets*.......................... .92% .84% .85% .77% 1.44% 1.28% Ratio of Net Investment Income to Average Net Assets*.............. 3.46% 3.55% 4.08% 4.78% 4.65% 4.49% Portfolio Turnover................. 36%** 35% 75% 106% 85% 65% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets........................ 1.02% 1.04% 1.14% 1.23% N/A N/A Ratio of Net Investment Income to Average Net Assets......... 3.36% 3.35% 3.79% 4.32% N/A N/A
** Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 3.25% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. N/A=Not Applicable. 16 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, --------------------------------------------- 2004 2003 2002 (b) 2001 2000 1999 ---------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $10.78 $10.84 $10.41 $10.13 $10.20 $10.71 ------ ------ ------ ------ ------ ------ Net Investment Income............ .15 .32 .35 .42 .38 .39 Net Realized and Unrealized Gain/Loss...................... .07 (.01) .42 .22 (.04) (.47) ------ ------ ------ ------ ------ ------ Total from Investment Operations... .22 .31 .77 .64 .34 (.08) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .14 .32 .34 .35 .41 .43 Distributions from Net Realized Gain........................... .08 .05 -0- .01 -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions................ .22 .37 .34 .36 .41 .43 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $10.78 $10.78 $10.84 $10.41 $10.13 $10.20 ====== ====== ====== ====== ====== ====== Total Return* (a).................. 2.06%** 2.96%(c) 7.61% 6.42% 3.46% -0.81% Net Assets at End of the Period (In millions)........................ $ 22.6 $ 23.9 $ 17.1 $ 11.1 $ 8.6 $ 10.4 Ratio of Expenses to Average Net Assets*.......................... 1.67% 1.59% 1.60% 1.52% 2.20% 1.97% Ratio of Net Investment Income to Average Net Assets*.............. 2.71% 3.08%(c) 3.34% 4.02% 3.90% 3.80% Portfolio Turnover................. 36%** 35% 75% 106% 85% 65% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets........................ 1.77% 1.79% 1.89% 1.98% N/A N/A Ratio of Net Investment Income to Average Net Assets......... 2.61% 2.88%(c) 3.05% 3.56% N/A N/A
** Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 3%, charged on certain redemptions made within one year of purchase and declining to 0% after the fourth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (c) Certain non-recurring payments were made to Class B Shares, resulting in an increase to the Ratio of Net Investment Income to Average Net Assets and Total Return of .28%. N/A=Not Applicable. See Notes to Financial Statements 17 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, --------------------------------------------- 2004 2003 2002 (b) 2001 2000 1999 ---------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $10.73 $10.82 $10.40 $10.12 $10.20 $10.71 ------ ------ ------ ------ ------ ------ Net Investment Income............ .15 .30 .34 .42 .39 .40 Net Realized and Unrealized Gain/Loss...................... .07 (.02) .42 .22 (.06) (.48) ------ ------ ------ ------ ------ ------ Total from Investment Operations... .22 .28 .76 .64 .33 (.08) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .14 .32 .34 .35 .41 .43 Distributions from Net Realized Gain........................... .08 .05 -0- .01 -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions................ .22 .37 .34 .36 .41 .43 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $10.73 $10.73 $10.82 $10.40 $10.12 $10.20 ====== ====== ====== ====== ====== ====== Total Return* (a).................. 2.07%** 2.69%(c) 7.52% 6.42% 3.36% -0.81% Net Assets at End of the Period (In millions)........................ $ 21.5 $ 21.4 $ 13.2 $ 8.6 $ 6.4 $ 5.6 Ratio of Expenses to Average Net Assets*.......................... 1.67% 1.59% 1.60% 1.52% 2.20% 2.02% Ratio of Net Investment Income to Average Net Assets*.............. 2.71% 2.84%(c) 3.33% 4.02% 3.90% 3.75% Portfolio Turnover................. 36%** 35% 75% 106% 85% 65% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets........................ 1.77% 1.79% 1.89% 1.98% N/A N/A Ratio of Net Investment Income to Average Net Assets......... 2.61% 2.64%(c) 3.04% 3.56% N/A N/A
** Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1.00%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Ratio of Net Investment Income to Average Net Assets and Total Return of .06%. N/A=Not Applicable. 18 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Intermediate Term Municipal Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust (the "Trust"), a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors with a high level of current income exempt from federal income tax, consistent with preservation of capital. The Fund commenced investment operations on May 28, 1993 with two classes of common shares, Class A and Class B shares. The distribution of the Fund's Class C shares commenced on October 19, 1993. Effective November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2004, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute 19 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued substantially all of its taxable income, if any, to its shareholders. Therefore, no provision for federal income taxes is required. At March 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $112,654,795 ------------ Gross tax unrealized appreciation........................... $ 4,743,251 Gross tax unrealized depreciation........................... (592,123) ------------ Net tax unrealized appreciation on investments.............. $ 4,151,128 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short term capital gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2003 was as follows:
2003 Distributions paid from: Ordinary Income........................................... $318,534 Long Term Capital Gain.................................... 113,705
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $213,183 Undistributed long-term capital gain........................ $167,866
F. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's custody fee was reduced by $260 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
For the six months ended March 31, 2004, the Adviser waived $59,396 of its investment advisory fee. This represents .10% of its average net assets for the period. This waiver is voluntary in nature and can be discontinued at the Adviser's discretion. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $3,000 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an affiliated person. 20 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $23,100 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $24,900, representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund, and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of approximately $101,800 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2004. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 21 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2004, capital aggregated $73,393,157, $21,353,010 and $20,722,521 for Classes A, B and C, respectively. For the six months ended March 31, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,494,359 $ 16,069,983 Class B................................................... 261,698 2,819,568 Class C................................................... 298,156 3,209,067 ---------- ------------ Total Sales................................................. 2,054,213 $ 22,098,618 ========== ============ Dividend Reinvestment: Class A................................................... 132,621 $ 1,425,761 Class B................................................... 26,847 289,198 Class C................................................... 25,455 272,936 ---------- ------------ Total Dividend Reinvestment................................. 184,923 $ 1,987,895 ========== ============ Repurchases: Class A................................................... (1,140,480) $(12,313,454) Class B................................................... (409,709) (4,428,184) Class C................................................... (314,932) (3,379,926) ---------- ------------ Total Repurchases........................................... (1,865,121) $(20,121,564) ========== ============
At September 30, 2003, capital aggregated $68,210,867, $22,672,428 and $20,620,444 for Classes A, B and C, respectively. For the year ended September 30, 2003, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 3,510,100 $ 37,536,509 Class B................................................... 1,307,031 14,035,027 Class C................................................... 1,310,574 14,015,083 ---------- ------------ Total Sales................................................. 6,127,705 $ 65,586,619 ========== ============ Dividend Reinvestment: Class A................................................... 184,280 $ 1,971,012 Class B................................................... 41,458 444,020 Class C................................................... 38,700 412,895 ---------- ------------ Total Dividend Reinvestment................................. 264,438 $ 2,827,927 ========== ============ Repurchases: Class A................................................... (2,098,791) $(22,416,093) Class B................................................... (707,557) (7,574,011) Class C................................................... (572,938) (6,089,119) ---------- ------------ Total Repurchases........................................... (3,379,286) $(36,079,223) ========== ============
22 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received thereon, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received thereon, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2004 and the year ended September 30, 2003, 10,467 and 49,940 Class B Shares converted to Class A Shares and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received thereon, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2004 and the year ended September 30, 2003, no Class C Shares converted to Class A Shares. Class B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be imposed on most redemptions made within four years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 3.00% 1.00% Second...................................................... 2.50% None Third....................................................... 2.00% None Fourth...................................................... 1.00% None Fifth and Thereafter........................................ None None
For the six months ended March 31, 2004, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $8,800 and CDSC on redeemed shares of approximately $24,600. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $43,410,867 and $41,983,888 respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, 23 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued except when taking delivery of a security underlying a futures contract. In these instances, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Bonds and typically closes the contract prior to delivery date. These contracts are generally used to manage the Fund's effective maturity and duration. Upon entering into futures contracts, the Fund maintains, an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated in the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2004, were as follows:
CONTRACTS Outstanding at September 30, 2003........................... 162 Futures Opened.............................................. 283 Futures Closed.............................................. (315) ---- Outstanding at March 31, 2004............................... 130 ====
The futures contracts outstanding as of March 31, 2004, and the description and unrealized appreciation/depreciation were as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 5 year futures, June 2004............. 107 $(189,376) (Current Notional Value of $113,563 per contract) U.S. Treasury Notes 10 year futures, June 2004............ 23 $ (54,722) (Current Notional Value of $115,406 per contract)....... --- --------- 130 $(244,098) === =========
6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares, and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. 24 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Annual fees under the Plans of up to .25% of Class A average daily net assets and 1.00% each of Class B and Class C average daily net assets are accrued daily. The annual fees for Class A shares are paid quarterly and the annual fees for Class C shares are paid monthly. For Class B shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $1,296,800, and $34,200, for Class B and Class C shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in these fees for the six months ended March 31, 2004, are payments retained by Van Kampen of approximately $149,200, and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $11,600. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, certain officers of such affiliates and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the named investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser, certain affiliates of the Adviser and certain investment companies advised by the Adviser or its affiliates are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the Van Kampen funds; the funds, including the Fund, are also named as nominal defendants. The complaint in the derivative action alleges that defendants gave a proprietary sales force economic incentives to promote the sale of proprietary mutual funds and that they improperly failed to disclose these economic incentives. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley DW Inc. in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the Van Kampen funds, rescission of the management contracts for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary damages. This complaint will be coordinated with the consolidated complaint. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 25 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS, INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 26 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 138, 338, 538 INF SAR 5/04 RN04-00397P-Y03/04 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen New York Tax Free Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2004. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. Income may subject certain individuals to the federal Alternative Minimum Tax (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/04
A SHARES B SHARES C SHARES since 7/29/94 since 7/29/94 since 7/29/94 - -------------------------------------------------------------------------------------------------- W/MAX. W/MAX. W/MAX. AVERAGE ANNUAL W/O SALES 4.75% SALES W/O SALES 4.00% SALES W/O SALES 1.00% SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 6.80% 6.26% 6.23% 6.23% 6.02% 6.02% 5-year 5.59 4.57 4.81 4.56 4.84 4.84 1-year 6.10 1.06 5.32 1.32 5.25 4.25 6-months 3.02 -1.89 2.64 -1.36 2.64 1.64 - -------------------------------------------------------------------------------------------------- 30-Day SEC Subsidized Yield 2.89% 2.28% 2.28% 30-Day SEC Yield 2.55 1.93 1.93
Past performance is no guarantee of future results and current performance may be lower or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit vankampen.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C shares. The since inception return for Class B shares reflect its conversion into Class A shares seven years after purchase. See footnote 3 in the Notes to Financial Statements for additional information Figures shown above assume reinvestment of all dividends and capital gains. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. The subsidized SEC yields reflect some or all of the expenses that the adviser had voluntarily waived. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004 Van Kampen New York Tax Free Income Fund is managed by the adviser's Municipal Fixed Income team. Members of the team include Dennis S. Pietrzak, Executive Director; John R. Reynoldson, Executive Director; and Timothy D. Haney, Vice President.(1) MARKET CONDITIONS The state of the U.S. economy remained mixed over the six-month period under review. On the positive side, economic growth continued to be robust with Gross Domestic Product growth topping 4% in both quarters. While this strength in output has historically triggered fears of rising interest rates, yields remained stubbornly low across the municipal yield curve. These low yields were partly the result of the continued low levels of observed inflation in the U.S. economy. Unfortunately, they also reflected continuing weakness in the job market, which remained soft throughout the period. The soft job numbers, coupled with persistently low inflation, led the Federal Open Market Committee (the Fed) to maintain its accommodative stance throughout the period. In keeping with the general trend for calendar 2003, the six months under review saw record levels of issuance as municipalities sought to take advantage of historically low interest rates. Many cities and states moved to reduce expenditures by refinancing existing debt and replacing it with lower-yielding bonds. In other cases, municipalities attempted to meet current and future funding needs by issuing new debt. Low interest rates also had an impact on the demand for municipal bonds. Retail and institutional investor activity slowed as holders of municipal bonds saw little reason to sell bonds purchased at higher yield levels and reinvest at historically low yields. However, the period was marked by rising activity among non-traditional investors, such as hedge funds and insurance companies seeking to take advantage of the attractiveness of municipal bonds relative to taxable securities. Additionally, investors' search for yield led to significant outperformance by lower-rated bonds with greater credit risk. Sectors such as health care, with a preponderance of lower-rated issues, performed particularly well. The New York economy continued to struggle with fiscal problems during the period, and the executive and legislative branches of the state government remained locked in their perennial budget battle. Signs of economic improvement in the rest of the country, however, did bode particularly well for New York, since the state's tax revenues are in large part driven by revenues from the financial sector. The state continued to be among the country's largest (1)Team members may change at any time without notice. 2 municipal-bond issuers as local- and state-level projects sought funding for their ongoing operations. PERFORMANCE ANALYSIS The fund returned 3.02 percent for the six months ended March 31, 2004 (Class A shares, unadjusted for sales charges), modestly underperforming its benchmark, the Lehman Brothers Municipal Bond Index. (See table below.) Our analysis of the economy and interest rates indicated that the next major movement in rates was likely to be upward, which to our thinking warranted a more defensive positioning. As a result, we chose to emphasize securities that provided sufficient return potential and were most likely to hold up well in a rising interest-rate environment. We de-emphasized low-coupon bonds from the long end of the yield curve given their high sensitivity to interest rates, focusing instead on securities with premium coupons from the 15- to 22-year segment of the market in the belief that these bonds offered the most attractive risk/reward profile. We also kept the fund's overall duration (a measure of interest-rate sensitivity) below that of the benchmark. Unfortunately, the longer segment of the curve outperformed during the period, and our defensive stance hampered performance slightly. We funded our purchases of intermediate bonds with the proceeds of sales from elsewhere in the portfolio. These sales included several of the fund's longer- dated positions as well as some of its income-oriented positions that had met their performance targets during the period. The fund also benefited from pre-refundings of several securities, which helped support the portfolio's net asset value (NAV). We generally limited our purchases to liquid, high-quality bonds. Our high-quality bias was reflected in the portfolio as a whole, which ended the period with more than 80 percent of its assets invested in securities rated AA or higher. We also maintained the portfolio's diversification over the reporting period. The fund's holdings were spread across the full spectrum of municipal-bond market sectors in order to limit the risk of over-concentration in any one segment. At the end of the period, the portfolio's largest sector weightings were general TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
- -------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 3.02% 2.64% 2.64% 3.12% - --------------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and an index definition. 3 purpose at approximate 24 percent, followed by higher education at approximate 19 percent and health care at approximate 9 percent. We anticipate that rates may eventually begin to move upward. That being said, we believe the fund is positioned to continue to provide investors with attractive income across an array of possible market environments. We will continue to actively explore the New York market for attractive investment opportunities. TOP 5 SECTORS AS OF 3/31/04 RATINGS ALLOCATION AS OF 3/31/04 General Purpose 23.8% AAA 46.7% Higher Education 19.5 AA 35.9 Health Care 9.2 A 12.7 Public Education 8.0 BBB 2.7 Water & Sewer 6.9 NR 2.0
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. All percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Ratings allocations based upon ratings as issued by Standard and Poor's. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- MUNICIPAL BONDS 98.7% NEW YORK 97.8% $ 330 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van Allen Proj Ser A............................ 6.875% 06/01/39 $ 298,171 1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City of Buffalo Proj (FSA Insd).................. 5.750 05/01/21 1,420,662 1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City of Buffalo Proj (FSA Insd).................. 5.750 05/01/22 1,415,450 1,250 Hempstead Town, NY Indl Dev Adelphi Univ Civic Fac................................... 5.750 06/01/22 1,378,612 500 Islip, NY Cmnty Dev Agy Cmnty Dev Rev NY Institute of Technology Rfdg (Prerefunded @ 03/01/06)................................... 7.500 03/01/26 565,480 1,290 Islip, NY Res Recovery Agy Res 1985 Fac Ser E (FSA Insd)................................ 5.750 07/01/22 1,406,539 1,250 Long Island Pwr Auth, NY Elec Sys Rev Gen Ser A (AMBAC Insd).......................... 5.500 12/01/09 1,436,325 2,000 Long Island Pwr Auth, NY Elec Sys Rev Gen Ser C....................................... 5.500 09/01/19 2,180,120 1,000 Metropolitan Trans Auth NY Rev Ser A Rfdg (AMBAC Insd)................................ 5.500 11/15/19 1,121,210 1,000 Metropolitan Trans Auth NY Svc Contract Ser A Rfdg...................................... 5.125 01/01/29 1,041,560 1,000 Monroe Cnty, NY Indl Dev Agy Nazareth College Rochester Proj (MBIA Insd).......... 5.250 10/01/21 1,085,370 1,155 Monroe Cnty, NY Indl Dev Agy Saint John Fisher College Proj (Radian Insd) (a)....... 5.375 06/01/09 1,303,140 2,510 Nassau Cnty, NY Interim Fin Auth Sales Tax Secd Ser A (Prerefunded @ 11/15/10)......... 5.750 11/15/13 2,924,627 1,000 Nassau Cnty, NY Interim Fin Auth Sales Tax Secd Ser A1 (AMBAC Insd).................... 5.375 11/15/16 1,119,480 2,425 New York City Fiscal 2003 Ser I............. 5.750 03/01/15 2,739,595 1,500 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (FSA Insd)............................ 5.500 02/15/18 1,665,450 1,000 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (FSA Insd)............................ 5.500 02/15/19 1,104,370 1,000 New York City Hsg Dev Corp Ser A............ 5.500 11/01/34 1,057,380 475 New York City Indl Dev Agy Civic Fac Rev Cmnty Res Developmentally Disabled.......... 7.500 08/01/26 485,241 500 New York City Indl Dev Agy Civic Fac Rev College of New Rochelle Proj................ 5.750 09/01/17 532,670 1,800 New York City Indl Dev Agy Civic Fac Rev New York Inst of Technology Proj (MBIA Insd).... 5.250 03/01/18 1,986,462 500 New York City Indl Dev Agy Civic Fac Rev YMCA Greater NY Proj........................ 6.000 08/01/07 557,940 1,015 New York City Indl Dev Agy Fac Rev Royal Charter-NY Presbyterian (FSA Insd).......... 5.250 12/15/11 1,165,758
6 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,405 New York City Indl Dev Agy Fac Rev Royal Charter-NY Presbyterian (FSA Insd).......... 5.375% 12/15/16 $ 1,582,128 1,440 New York City Indl Dev Agy Spl Fac Rev Terminal One Group Assn Proj................ 6.100 01/01/09 1,470,960 500 New York City Muni Wtr Fin Ser B............ 6.000 06/15/33 587,060 825 New York City Muni Wtr Fin Ser B (Prerefunded @ 06/15/10).................... 6.000 06/15/33 985,182 2,500 New York City Ser A......................... 5.500 08/01/20 2,737,525 1,000 New York City Ser A Rfdg.................... 5.250 03/15/14 1,119,650 1,000 New York City Ser A Rfdg.................... 5.250 03/15/15 1,102,990 1,000 New York City Ser B (MBIA Insd)............. 5.875 08/01/15 1,164,200 1,000 New York City Ser H (FGIC Insd)............. 6.000 08/01/12 1,189,410 1,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser A Rfdg (b).............. 5.500/14.000 11/01/26 1,142,740 1,500 New York City Transitional Fin Auth Rev Future Tax Secd Ser C (AMBAC Insd).......... 5.250 08/01/21 1,625,595 1,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser D (MBIA Insd)........... 5.250 02/01/19 1,098,050 1,540 New York City Transitional Future Tax Secd Ser B....................................... 5.500 02/01/15 1,722,382 2,000 New York St Dorm Auth Lease Rev Court Fac Ser A....................................... 5.500 05/15/20 2,181,780 510 New York St Dorm Auth Lease Rev Insd St Judicial Inst At Pace (AMBAC Insd).......... 5.500 07/01/09 585,766 600 New York St Dorm Auth Lease Rev Insd St Judicial Inst At Pace (AMBAC Insd).......... 5.500 07/01/10 693,570 1,060 New York St Dorm Auth Lease Rev Master Boces Prog (FSA Insd)............................. 5.250 08/15/22 1,150,153 1,500 New York St Dorm Auth Lease Rev Muni Hlth Fac Impt Pg Ser 1 (FSA Insd)................ 5.500 01/15/14 1,694,430 1,000 New York St Dorm Auth Lease Rev St Univ Dorm Fac......................................... 5.375 07/01/16 1,107,970 1,000 New York St Dorm Auth Rev City Univ Cons Third Ser 1 (FGIC Insd)..................... 5.250 07/01/25 1,060,270 1,230 New York St Dorm Auth Rev City Univ Ser D Rfdg (FSA Insd)............................. 5.750 07/01/12 1,441,757 750 New York St Dorm Auth Rev City Univ Sys Cons Ser A....................................... 5.625 07/01/16 870,630 1,000 New York St Dorm Auth Rev City Univ Sys Cons Ser B....................................... 6.000 07/01/14 1,174,210 1,890 New York St Dorm Auth Rev Dept Ed........... 5.250 07/01/21 2,062,840 1,000 New York St Dorm Auth Rev Insd Brooklyn Law Sch Ser B (XLCA Insd)....................... 5.375 07/01/23 1,098,480 1,055 New York St Dorm Auth Rev Insd NY St Rehab Assn Ser A (AMBAC Insd)..................... 5.500 07/01/13 1,207,627
See Notes to Financial Statements 7 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,040 New York St Dorm Auth Rev Insd NY St Rehab Assn Ser A (AMBAC Insd)..................... 5.500% 07/01/15 $ 1,178,601 1,500 New York St Dorm Auth Rev Mem Sloan- Kettering Ctr Ser 1 (MBIA Insd)............. 5.000 07/01/20 1,597,620 2,805 New York St Dorm Auth Rev Mental Hlth Fac Impt Ser B.................................. 5.250 02/15/20 3,032,626 605 New York St Dorm Auth Rev Mental Hlth Svc Fac Impt Ser B (MBIA Insd).................. 5.250 08/15/31 628,172 1,200 New York St Dorm Auth Rev Miriam Osborn Mem Home Ser B (ACA Insd)....................... 6.375 07/01/29 1,328,028 750 New York St Dorm Auth Rev Nursing Home Menorah Campus (FHA Gtd).................... 5.950 02/01/17 807,690 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser C (MBIA Insd)........................... 5.250 10/01/16 1,111,780 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser D (MBIA Insd)........................... 5.500 10/01/17 1,133,370 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser I (MBIA Insd)........................... 5.750 10/01/18 1,150,940 1,000 New York St Dorm Auth Rev Secd Hosp North Gen Hosp Rfdg (MBIA Insd)................... 5.750 02/15/17 1,146,060 1,000 New York St Dorm Auth Rev Secd Hosp North Gen Hosp Rfdg............................... 5.750 02/15/18 1,132,370 1,000 New York St Dorm Auth Rev Second Hosp Interfaith Med Cent Ser D (FSA Insd)........ 5.750 02/15/08 1,125,310 1,000 New York St Dorm Auth Rev St Personal Income Tax Ed Ser A................................ 5.375 03/15/20 1,101,440 1,000 New York St Dorm Auth Rev St Univ Ed Fac 1989 Res (MBIA Insd)........................ 6.000 05/15/15 1,175,070 1,140 New York St Dorm Auth Rev St Univ Ed Fac Ser A (FSA Insd)................................ 5.875 05/15/17 1,364,933 1,000 New York St Dorm Auth Rev St Univ Ed Fac Ser A........................................... 5.250 05/15/21 1,108,460 1,665 New York St Dorm Auth Rev St Univ Ed Fac Ser B (FSA Insd)................................ 5.250 05/15/13 1,913,235 500 New York St Energy Resh & Dev Auth Gas Fac Rev Brooklyn Union Gas Ser B (Inverse Fltg) (c)......................................... 12.504 07/01/26 607,605 2,500 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds...................... 5.000 06/15/21 2,666,000 1,000 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds Pooled Fin Pgm I..... 5.250 09/15/19 1,098,310 1,890 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds Ser B................ 5.000 12/15/21 2,004,024 1,000 New York St Hsg Fin Agy St Personal Income Tax Rev Econ Dev & Hsg Ser A................ 5.250 09/15/19 1,085,970 2,280 New York St Loc Govt Assist Corp Ser E Rfdg........................................ 6.000 04/01/14 2,743,570
8 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,500 New York St Med Care Fac Fin Hosp & Nursing Home Ser D Agy Rev (FHA Gtd)................ 6.200% 02/15/28 $ 1,582,935 1,000 New York St Mtg Agy Rev Homeowner Mtg Ser 71.......................................... 5.400 04/01/29 1,038,420 1,290 New York St Mtg Agy Rev Homeowner Mtg Ser 82.......................................... 5.650 04/01/30 1,380,984 995 New York St Mtg Agy Rev Ser 101............. 5.400 04/01/32 1,043,208 1,885 New York St Ser C Rfdg...................... 5.000 04/15/19 2,017,176 1,000 New York St Twy Auth Svc Contract Rev Loc Hwy & Brdg.................................. 6.000 04/01/07 1,114,830 460 New York St Twy Auth Svc Contract Rev Loc Hwy & Brdg.................................. 5.500 04/01/16 517,969 500 New York St Urban Dev Corp Rev Correctional Fac Ser A Rfdg.............................. 5.500 01/01/14 567,115 1,400 New York St Urban Dev Corp Rev Personal Income Tax St Fac Ser A..................... 5.375 03/15/18 1,542,562 325 Oneida Cnty, NY Indl Dev Agy Civic Fac Saint Elizabeth Med Ser A......................... 5.875 12/01/29 291,226 200 Port Auth NY & NJ Spl Oblig................. 7.000 10/01/07 208,962 1,000 Rockland Cnty, NY Solid Waste Ser B (AMBAC Insd)....................................... 5.000 12/15/23 1,066,870 1,000 Rondout Vly Cent Sch Dist NY Accord Ser A Rfdg (FGIC Insd)............................ 5.000 03/01/19 1,066,200 1,320 Sodus, NY Cent Sch Dist Rfdg (FGIC Insd).... 5.125 06/15/18 1,432,055 110 Syracuse, NY Hsg Auth Rev Sub Proj Loretto Rest Ser B.................................. 7.500 08/01/10 111,066 250 Syracuse, NY Indl Dev Agy Rev First Mtg Jewish Home Ser A........................... 7.375 03/01/21 258,630 2,000 Tobacco Settlement Fin Corp NY Ser C-1...... 5.500 06/01/22 2,190,420 2,000 Triborough Brdg & Tunl Auth NY Rev Gen Purp Ser A....................................... 5.250 01/01/18 2,182,460 1,000 Triborough Brdg & Tunl Auth NY Rev Gen Purp Ser A....................................... 5.000 01/01/32 1,032,010 1,000 Ulster Cnty, NY Res Recovery Agy Solid Waste Sys Rev Rfdg (AMBAC Insd)................... 5.250 03/01/18 1,102,800 1,000 United Nations Dev Corp NY Rev Ser A Rfdg... 5.250 07/01/19 1,035,840 1,000 Upper Mohawk Vly Regl Wtr Fin Auth NY Wtr Sys Rev (AMBAC Insd)........................ 5.750 04/01/20 1,137,730 380 Utica, NY Indl Dev Agy Civic Fac Rev Utica College Proj Ser A.......................... 5.750 08/01/28 367,650 500 Westchester Cnty, NY Indl Dev Agy Mtg Kendal on Hudson Proj Ser A........................ 6.375 01/01/24 510,855 1,000 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty Dev Ppty Yonkers Inc Ser A.................. 6.625 02/01/26 1,087,270 ------------ 121,977,394 ------------
See Notes to Financial Statements 9 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- U. S. VIRGIN ISLANDS 0.9% $1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt Taxes Ln Nt Ser A........................... 6.375% 10/01/19 $ 1,131,150 ------------ TOTAL INVESTMENTS 98.7% (Cost $115,760,195)......................................................... 123,108,544 OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%................................... 1,605,077 ------------ NET ASSETS 100.0%............................................................ $124,713,621 ============
(a) All or a portion of this security has been physically segregated in connection with open futures contracts. (b) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (c) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Trust to enhance the yield of the portfolio. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FHA--Federal Housing Administration FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. Radian--Radian Asset Assurance XLCA--XL Capital Assurance Inc. 10 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2004 (Unaudited) ASSETS: Total Investments (Cost $115,760,195)....................... $123,108,544 Cash........................................................ 79,191 Receivables: Interest.................................................. 1,667,462 Fund Shares Sold.......................................... 237,953 Investments Sold.......................................... 70,000 Other....................................................... 69,810 ------------ Total Assets............................................ 125,232,960 ------------ LIABILITIES: Payables: Income Distributions...................................... 110,910 Distributor and Affiliates................................ 96,613 Variation Margin on Futures............................... 68,094 Fund Shares Repurchased................................... 44,082 Investment Advisory Fee................................... 26,721 Trustees' Deferred Compensation and Retirement Plans........ 100,081 Accrued Expenses............................................ 72,838 ------------ Total Liabilities....................................... 519,339 ------------ NET ASSETS.................................................. $124,713,621 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $117,905,747 Net Unrealized Appreciation................................. 7,044,568 Accumulated Undistributed Net Investment Income............. 157,103 Accumulated Net Realized Loss............................... (393,797) ------------ NET ASSETS.................................................. $124,713,621 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $65,912,434 and 3,975,764 shares of beneficial interest issued and outstanding)............. $ 16.58 Maximum sales charge (4.75%* of offering price)......... .83 ------------ Maximum offering price to public........................ $ 17.41 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $40,298,835 and 2,433,988 shares of beneficial interest issued and outstanding)............. $ 16.56 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $18,502,352 and 1,116,707 shares of beneficial interest issued and outstanding)............. $ 16.57 ============
* On sales of $100,000 or more, the sales charge will be reduced. See Notes to Financial Statements 11 VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................... $2,860,435 ---------- EXPENSES: Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $80,181, $201,613 and $90,359, respectively)............................................. 372,153 Investment Advisory Fee..................................... 368,633 Shareholder Services........................................ 35,561 Custody..................................................... 11,407 Legal....................................................... 10,529 Trustees' Fees and Related Expenses......................... 9,334 Other....................................................... 72,813 ---------- Total Expenses.......................................... 880,430 Investment Advisory Fee Reduction....................... 215,036 ---------- Net Expenses............................................ 665,394 ---------- NET INVESTMENT INCOME....................................... $2,195,041 ========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 472,857 Futures................................................... (812,593) ---------- Net Realized Loss........................................... (339,736) ---------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 5,479,882 End of the Period: Investments............................................. 7,348,349 Futures................................................. (303,781) ---------- 7,044,568 ---------- Net Unrealized Appreciation During the Period............... 1,564,686 ---------- NET REALIZED AND UNREALIZED GAIN............................ $1,224,950 ========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $3,419,991 ==========
12 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 2,195,041 $ 4,179,882 Net Realized Gain/Loss............................... (339,736) 989,815 Net Unrealized Appreciation/Depreciation During the Period............................................. 1,564,686 (1,642,930) ------------ ------------ Change in Net Assets from Operations................. 3,419,991 3,526,767 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (1,215,948) (2,244,033) Class B Shares..................................... (612,907) (1,406,581) Class C Shares..................................... (274,189) (484,424) ------------ ------------ Total Distributions.................................. (2,103,044) (4,135,038) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... 1,316,947 (608,271) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 10,090,546 44,156,929 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 1,441,832 2,899,936 Cost of Shares Repurchased........................... (9,963,613) (24,649,019) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 1,568,765 22,407,846 ------------ ------------ TOTAL INCREASE IN NET ASSETS......................... 2,885,712 21,799,575 NET ASSETS: Beginning of the Period.............................. 121,827,909 100,028,334 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $157,103 and $65,106, respectively)............................. $124,713,621 $121,827,909 ============ ============
See Notes to Financial Statements 13 VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MAR. 31, -------------------------------------------- 2004 2003 2002 (a) 2001 2000 1999 ------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $16.40 $16.49 $15.76 $14.91 $14.94 $16.22 ------ ------ ------ ------ ------ ------ Net Investment Income................. .32 .69 .74 .73 .77 .79 Net Realized and Unrealized Gain/Loss........................... .17 (.10) .73 .88 (.07) (1.19) ------ ------ ------ ------ ------ ------ Total from Investment Operations........ .49 .59 1.47 1.61 .70 (.40) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.............................. .31 .68 .74 .76 .73 .79 Distributions from Net Realized Gain................................ -0- -0- -0- -0- -0- .09 ------ ------ ------ ------ ------ ------ Total Distributions..................... .31 .68 .74 .76 .73 .88 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD...... $16.58 $16.40 $16.49 $15.76 $14.91 $14.94 ====== ====== ====== ====== ====== ====== Total Return* (b)....................... 3.02%** 3.69% 9.63% 10.97% 4.91% -2.61% Net Assets at End of the Period (In millions)............................. $ 65.9 $ 63.6 $ 47.5 $ 43.5 $ 29.0 $ 36.6 Ratio of Expenses to Average Net Assets*............................... .73% .55% .38% .53% .61% .33% Ratio of Net Investment Income to Average Net Assets*................... 3.93% 4.19% 4.68% 4.74% 5.26% 5.03% Portfolio Turnover...................... 13%** 27% 43% 30% 58% 67% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets............................. 1.08% 1.06% 1.07% 1.13% 1.32% 1.23% Ratio of Net Investment Income to Average Net Assets................. 3.58% 3.68% 3.99% 4.14% 4.56% 4.13%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include Rule 12b-1 fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 14 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MAR. 31, -------------------------------------------- 2004 2003 2002 (a) 2001 2000 1999 ------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $16.38 $16.47 $15.74 $14.90 $14.92 $16.21 ------ ------ ------ ------ ------ ------ Net Investment Income................. .26 .56 .62 .62 .66 .68 Net Realized and Unrealized Gain/Loss........................... .17 (.09) .73 .86 (.06) (1.20) ------ ------ ------ ------ ------ ------ Total from Investment Operations........ .43 .47 1.35 1.48 .60 (.52) ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.............................. .25 .56 .62 .64 .62 .68 Distributions from Net Realized Gain................................ -0- -0- -0- -0- -0- .09 ------ ------ ------ ------ ------ ------ Total Distributions..................... .25 .56 .62 .64 .62 .77 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD...... $16.56 $16.38 $16.47 $15.74 $14.90 $14.92 ====== ====== ====== ====== ====== ====== Total Return* (b)....................... 2.64%** 2.93% 8.83% 10.09% 4.17% -3.34% Net Assets at End of the Period (In millions)............................. $ 40.3 $ 40.5 $ 40.5 $ 35.0 $ 28.8 $ 28.2 Ratio of Expenses to Average Net Assets*............................... 1.48% 1.29% 1.13% 1.28% 1.36% 1.08% Ratio of Net Investment Income to Average Net Assets*................... 3.18% 3.45% 3.92% 3.99% 4.51% 4.27% Portfolio Turnover...................... 13%** 27% 43% 30% 58% 67% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets............................. 1.83% 1.80% 1.82% 1.88% 2.07% 1.98% Ratio of Net Investment Income to Average Net Assets................. 2.83% 2.94% 3.24% 3.39% 3.81% 3.37%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees of 1% and do not reflect the reduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 15 VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MAR. 31, --------------------------------------------- 2004 2003 2002 (a) 2001 2000 1999 -------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $16.39 $16.48 $15.75 $14.91 $14.92 $ 16.20 ------ ------ ------ ------ ------ ------- Net Investment Income................. .26 .56 .62 .60 .68 .68 Net Realized and Unrealized Gain/Loss........................... .17 (.09) .73 .88 (.07) (1.19) ------ ------ ------ ------ ------ ------- Total from Investment Operations........ .43 .47 1.35 1.48 .61 (.51) ------ ------ ------ ------ ------ ------- Less: Distributions from Net Investment Income.............................. .25 .56 .62 .64 .62 .68 Distributions from Net Realized Gain................................ -0- -0- -0- -0- -0- .09 ------ ------ ------ ------ ------ ------- Total Distributions..................... .25 .56 .62 .64 .62 .77 ------ ------ ------ ------ ------ ------- NET ASSET VALUE, END OF THE PERIOD...... $16.57 $16.39 $16.48 $15.75 $14.91 $ 14.92 ====== ====== ====== ====== ====== ======= Total Return* (b)....................... 2.64%** 2.92%(c) 8.83% 10.09% 4.24% -3.28% Net Assets at End of the Period (In millions)............................. $ 18.5 $ 17.7 $ 12.0 $ 7.3 $ 4.6 $ 5.1 Ratio of Expenses to Average Net Assets*............................... 1.48% 1.30% 1.13% 1.30% 1.36% 1.08% Ratio of Net Investment Income to Average Net Assets*................... 3.18% 3.45%(c) 3.92% 3.97% 4.52% 4.28% Portfolio Turnover...................... 13%** 27% 43% 30% 58% 67% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets............................. 1.83% 1.81% 1.82% 1.90% 2.07% 1.98% Ratio of Net Investment Income to Average Net Assets................. 2.83% 2.94%(c) 3.23% 3.37% 3.81% 3.38%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1% charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and services fees of 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .03%. 16 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen New York Tax Free Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a non-diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors with a high level of current income exempt from federal, New York State and New York City income taxes, consistent with preservation of capital. The Fund seeks to achieve its investment objective by investing at least 80% of its total assets in a portfolio of New York municipal securities that are rated investment grade at the time of purchase. The Fund commenced investment operations on July 29, 1994, with three classes of common shares, Class A, Class B and Class C. Effective November 30, 2003, the Fund's investment adviser, Van Kampen Investment advisory Corp. merged into its affiliate, Van Kampen Asset Management. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payments is made. At March 31, 2004, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute 17 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued substantially all of its taxable income, if any, to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At September 30, 2003, the Fund had an accumulated capital loss carryforward for tax purposes of $733,829 which will expire on September 30, 2009. At March 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $115,802,777 ============ Gross tax unrealized appreciation........................... $ 7,403,879 Gross tax unrealized depreciation........................... (98,112) ------------ Net tax unrealized appreciation on investments.............. $ 7,305,767 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2003 was as follows: Distributions paid from: Ordinary Income........................................... $6,501 Long-term capital gain.................................... -0- ------ $6,501 ======
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $11,191
Net realized gains and losses may differ for financial reporting purposes primarily as a result of the deferral of losses relating to wash sale transactions. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser"), will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... 0.60% Over $500 million........................................... 0.50%
18 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued For the six months ended March 31, 2004, the Adviser waived approximately $215,000 of its advisory fees. This represents .35% of its average net assets for the period. This waiver is voluntary and can be discontinued at any time. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $3,100, representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $19,900 representing Van Kampen Investments or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2004, the Fund recognized expenses of approximately $25,400 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $55,170 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2004. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 19 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2004, capital aggregated $62,983,244, $37,115,788 and $17,806,715 for Classes A, B and C, respectively. For the six months ended March 31, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 418,104 $ 6,907,352 Class B................................................... 89,331 1,477,969 Class C................................................... 103,239 1,705,225 -------- ----------- Total Sales................................................. 610,674 $10,090,546 ======== =========== Dividend Reinvestment: Class A................................................... 50,094 $ 828,421 Class B................................................... 25,698 424,406 Class C................................................... 11,438 189,005 -------- ----------- Total Dividend Reinvestment................................. 87,230 $ 1,441,832 ======== =========== Repurchases: Class A................................................... (371,558) $(6,112,679) Class B................................................... (154,253) (2,544,397) Class C................................................... (79,441) (1,306,537) -------- ----------- Total Repurchases........................................... (605,252) $(9,963,613) ======== ===========
At September 30, 2003, capital aggregated $61,360,150, $37,757,810 and $17,219,022 for Classes A, B and C, respectively. For the year ended September 30, 2003, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,655,466 $ 27,062,415 Class B................................................... 519,637 8,452,098 Class C................................................... 531,210 8,642,416 ---------- ------------ Total Sales................................................. 2,706,313 $ 44,156,929 ========== ============ Dividend Reinvestment: Class A................................................... 96,700 $ 1,569,395 Class B................................................... 60,400 978,904 Class C................................................... 21,673 351,637 ---------- ------------ Total Dividend Reinvestment................................. 178,773 $ 2,899,936 ========== ============ Repurchases: Class A................................................... (751,111) $(12,180,934) Class B................................................... (568,107) (9,209,533) Class C................................................... (200,158) (3,258,552) ---------- ------------ Total Repurchases........................................... (1,519,376) $(24,649,019) ========== ============
20 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996 and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares seven years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2004 and year ended September 30, 2003, 880 and 49,822 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which the shares are purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2004 and year ended September 30, 2003, no Class C Shares converted to Class A Shares. Class B and Class C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be imposed on most redemptions made within six years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 4.00% 1.00% Second...................................................... 3.75% None Third....................................................... 3.50% None Fourth...................................................... 2.50% None Fifth....................................................... 1.50% None Sixth....................................................... 1.00% None Seventh and Thereafter...................................... None None
For the six months ended March 31, 2004, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $21,100 and CDSC on redeemed shares of approximately $34,800. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $16,753,974 and $15,674,378, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or to generate 21 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In these instances, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Bonds and typically closes the contract prior to the delivery date. These contracts are generally used to manage the Fund's effective maturity and duration. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated in the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the values of the contract (variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2004, are as follows:
CONTRACTS Outstanding at September 30, 2003........................... 172 Futures Opened.............................................. 287 Futures Closed.............................................. (297) ---- Outstanding at March 31, 2004............................... 162 ====
The futures contracts outstanding as of March 31, 2004, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 10-Year Futures June 2004 (Current Notional Value of $115,406 per contract).................. 28 (66,619) U.S. Treasury Notes 5-Year Futures June 2004 (Current Notional Value of $113,563 per contract).................. 134 (237,162) --- --------- 162 $(303,781) === =========
6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of 22 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and 1.00% each for Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $725,600 and $15,300 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in these fees for the six months ended March 31, 2004, are payments retained by Van Kampen of approximately $193,400 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $17,900. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, certain officers of such affiliates and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the named investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser, certain affiliates of the Adviser and certain investment companies advised by the Adviser or its affiliates are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the Van Kampen funds; the funds, including the Fund, are also named as nominal defendants. The complaint in the derivative action alleges that defendants gave a proprietary sales force economic incentives to promote the sale of proprietary mutual funds and that they improperly failed to disclose these economic incentives. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley DW Inc. in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the Van Kampen funds, rescission of the management contracts for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary damages. This complaint will be coordinated with the consolidated complaint. 23 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 24 VAN KAMPEN NEW YORK TAX FREE INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, NY 10020 DISTRIBUTOR VAN KAMPEN FUNDS, INC. 1221 Avenue of the Americas New York, NY 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 25 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 235, 325, 425 NYTF SAR 5/04 RN04-00398P-Y03/04 Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semi-annual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. [Reserved.] Item 9. Controls and Procedures (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a) Code of Ethics -- Not applicable for semi-annual reports. (b)(1) A certification for the Principal Executive Officer of the registrant is attached hereto as part of EX-99.CERT. (b)(2) A certification for the Principal Financial Officer of the registrant is attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen Tax Free Trust ------------------------------------- By: /s/ Ronald E. Robison --------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: May 18, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison --------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: May 18, 2004 By: /s/ John L. Sullivan -------------------- Name: John L. Sullivan Title: Principal Financial Officer Date: May 18, 2004 EX-99.CERT 2 c84426exv99wcert.txt CERTIFICATION I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Tax Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: May 18, 2004 /s/ Ronald E. Robison ---------------------- Principal Executive Officer I, John L. Sullivan, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Tax Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: May 18, 2004 /s/ John L. Sullivan --------------------- Principal Financial Officer EX-99.906CERT 3 c84426exv99w906cert.txt CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Tax Free Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended March 31, 2004 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: May 18, 2004 /s/ Ronald E. Robison ---------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Tax Free Trust and will be retained by Van Kampen Tax Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Tax Free Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended March 31, 2004 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: May 18, 2004 /s/ John L. Sullivan --------------------- John L. Sullivan Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Tax Free Trust and will be retained by Van Kampen Tax Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. -----END PRIVACY-ENHANCED MESSAGE-----