N-CSRS 1 c94226nvcsrs.txt SEMIANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4386 Van Kampen Tax Free Trust -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas, New York, New York 10020 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: 9/30 Date of reporting period: 3/31/05 Item 1. Reports to Shareholders. The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Insured Tax Free Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2005. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/05
A SHARES B SHARES C SHARES since 12/14/84 since 5/03/93 since 8/13/93 --------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES Since Inception 7.74% 7.48% 4.80% 4.80% 4.41% 4.41% 10-year 5.60 5.09 5.04 5.04 4.79 4.79 5-year 6.20 5.17 5.37 5.13 5.39 5.39 1-year 2.47 -2.42 1.62 -2.28 1.62 0.65 6-month 0.84 -3.94 0.46 -3.46 0.46 -0.52 --------------------------------------------------------------------------------------------- SEC Yield 3.05% 2.45% 2.45%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect their conversion into Class A shares seven years after purchase. The since inception returns for Class C shares reflect their conversion into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding nonincome items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005 Van Kampen Insured Tax Free Income Fund is managed by the Adviser's Municipal Fixed Income team.(1) Members of the team include James F. Willison, Managing Director of the Adviser; Joseph R. Arcieri, Executive Director of the Adviser; and Joseph A. Piraro, Vice President of the Adviser. MARKET CONDITIONS The six-month period ended March 31, 2005, was characterized by continued short-term interest rate increases, and the specter of rising inflation resulting from record-high crude oil prices. The Federal Open Market Committee (the "Fed") raised the federal funds target rate 100 basis points during the period through a series of four, "measured" 0.25 percent tightenings to 2.75 percent by the end of March. Although rates in the short and intermediate areas of the yield curve shifted upward as the Fed tightened, long-term interest rates fell as buyers did not seem deterred by the prospect of rising inflation. As a result, the yield curve (the difference between short and longer-term yields) flattened and the long end of the municipal market handily outperformed the shorter end. The municipal market in total posted positive returns during the period, though it was not uniformly strong. In contrast to the strong showing by longer-term bonds, shorter-term municipals were hampered by the Fed's tightening and turned in a slightly negative showing. Within the investment-grade segment of the market, yield differentials between BBB-rated municipals and AAA-rated securities were flat to slightly wider, though BBB-rated securities still outperformed high grades due to their higher coupons, while securities rated below investment grade strongly outperformed as investors sought out their higher yields. The Fed's interest rate hikes did not dampen investors' appetites for municipal bonds, as net inflows into municipal bond funds topped $700 million during the period. The supply of new issues was modest during the closing months of 2004 (the first half of the period) before soaring in the opening months of 2005 as long-term issuers rushed to bring securities to market in anticipation of additional interest rate increases in the near term. (1)Team members may change at any time without notice. 2 PERFORMANCE ANALYSIS The fund returned 0.84 percent for the six months ended March 31, 2005 (Class A shares, unadjusted for sales charge). In comparison, the fund's benchmark index, the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period. TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
-------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 0.84% 0.46% 0.46% 1.21% --------------------------------------------------------------
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND INDEX DEFINITIONS. One of our primary strategies in managing the fund was to take advantage of compelling opportunities in the 25- to 30-year segment of the market. We focused here on purchasing securities with premium (that is, above-market) coupons and moderate interest rate sensitivity. Our purchases of these securities were funded by the proceeds of sales of several shorter-maturity positions, many of which had been refunded during the period. This was part of our ongoing strategy of positioning the fund for an environment of rising short-term interest rates by limiting the fund's exposure to that segment of the market. In terms of purchases, we continued to favor the essential services segments of the market, such as education and transportation. In turn, we avoided the housing sector out of concerns about those bonds' structural characteristics. We also avoided zero coupon bonds. The fund remained well diversified geographically, with no one state or region dominating the portfolio. Many of our purchases were from states with either high taxes, and thus strong ongoing demand for the bonds, or a lack of dual tax-exempt status, such as Illinois. Because the fund focuses on bonds that offer the credit enhancement of insurance, the entire portfolio was rated AAA at the close of the period. There is no guarantee the security sectors mentioned will continue to perform well or be held by the fund in the future. 3
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05 Illinois 15.0% Texas 12.9 California 10.3 Washington 8.8 Florida 6.8 Colorado 4.4 Pennsylvania 4.2 Indiana 3.3 Louisiana 2.8 Oklahoma 2.8 Georgia 2.6 Alabama 2.4 New Jersey 2.2 Michigan 2.1 Arizona 2.0 North Carolina 1.7 Nevada 1.6 New York 1.5 South Dakota 1.3 District of Columbia 1.1 Wisconsin 1.1 North Dakota 0.9 South Carolina 0.8 Arkansas 0.8 Ohio 0.5 Missouri 0.5 Massachusetts 0.5 Oregon 0.4 Alaska 0.4 West Virginia 0.4 Utah 0.3 Puerto Rico 0.3 New Hampshire 0.2 Iowa 0.2 Nebraska 0.2 Mississippi 0.1 Virginia 0.1 ----- Total Long-Term Investments 97.5% Short-Term Investments 4.4 ----- Total Investments 101.9 Liabilities in Excess of Other Assets -1.9 ----- Net Assets 100.0%
CREDIT QUALITY AS OF MARCH 31, 2005 AAA/Aaa 98.7% Not Rated 1.3
Based upon the highest quality ratings as issued by Standard & Poor's or Moody's. 4
TOP FIVE SECTORS AS OF MARCH 31, 2005 Public Education 17.0% Public Building 11.3 Wholesale Electric 11.1 Airport 10.9 General Purpose 9.8
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the industries shown above. Sectors are as a percentage of long-term investments. Summary of investments by state classification are as a percentage of net assets. Credit quality is based on long-term investments. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 5 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. 6 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities and information on how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 7 Expense Example As a shareholder of the Fund, you incur two types of costs : (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales charge on redemptions of Class B and C Shares; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/01/04 - 3/31/05. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* ------------------------------------------------- 10/1/04 3/31/05 10/1/04-3/31/05 Class A Actual..................................... $1,000.00 $1,008.44 $4.41 Hypothetical............................... 1,000.00 1,020.53 4.43 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,004.56 8.15 Hypothetical............................... 1,000.00 1,016.83 8.20 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,004.56 8.15 Hypothetical............................... 1,000.00 1,016.83 8.20 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.88%, 1.63%, and 1.63% for Class A, B, and C Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 8 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MUNICIPAL BONDS 97.5% ALABAMA 2.4% $ 1,385 Alabama St Brd Ed Rev Calhoun Cmnty College (AMBAC Insd).................................. 5.000% 05/01/21 $ 1,460,704 1,000 Alabama St Brd Ed Rev Calhoun Cmnty College (AMBAC Insd).................................. 5.000 05/01/22 1,051,310 2,255 Alabama St Brd Ed Rev George C Wallace Cmnty College (AMBAC Insd) (a)...................... 5.250 07/01/23 2,414,609 1,760 Alabama St Brd Ed Rev Shelton St Cmnty College Rfdg (AMBAC Insd)............................. 5.500 10/01/10 1,943,656 1,250 Alabama Wtr Pollution Ctl Auth (AMBAC Insd)... 5.500 08/15/13 1,368,075 2,530 Bessemer, AL Wt (XLCA Insd) (a)............... 5.000 02/01/29 2,607,797 2,145 Birmingham, AL Wtrwks & Swr Brd Ser A (FGIC Insd) (a)............................... 5.000 01/01/21 2,249,397 4,255 Hoover, AL Wt (XLCA Insd) (a)................. 5.000 03/01/14 4,590,549 3,120 Huntsville, AL Hlthcare Auth Ser A (MBIA Insd)......................................... 5.400 06/01/22 3,360,396 2,500 Huntsville, AL Hlthcare Auth Ser A (MBIA Insd)......................................... 5.500 06/01/27 2,704,675 1,740 Mobile Cnty, AL Impt Wt & Rfdg (FSA Insd)..... 5.250 08/01/18 1,884,664 2,260 Mobile Cnty, AL Impt Wt & Rfdg (FSA Insd)..... 5.250 08/01/19 2,440,642 -------------- 28,076,474 -------------- ALASKA 0.4% 2,000 Alaska St Hsg Fin Corp Gen Hsg Ser A (FGIC Insd)................................... 5.000 12/01/30 2,053,100 1,000 Alaska St Hsg Fin Corp Gen Hsg Ser A (FGIC Insd)................................... 5.250 12/01/41 1,043,450 1,425 Anchorage, AK Wtr Rev Rfdg (AMBAC Insd)....... 6.000 09/01/19 1,584,571 -------------- 4,681,121 -------------- ARIZONA 2.0% 1,940 Arizona St Univ Ctf Part Resh Infrastructure Proj (AMBAC Insd)............................. 5.250 09/01/23 2,072,890 1,225 Arizona St Univ Ctf Part Resh Infrastructure Proj (AMBAC Insd)............................. 5.250 09/01/24 1,305,005 2,900 Arizona Tourism & Sports Auth Multi Purp Stad Fac Ser A (MBIA Insd)......................... 5.375 07/01/22 3,147,950 7,500 Phoenix, AZ Civic Impt Corp Trans Excise Tax Rev Light Rail Proj (AMBAC Insd).............. 5.000 07/01/20 7,923,075 4,000 Phoenix, AZ Civic Impt Corp Waste Wtr Sys Rev Jr Lien (MBIA Insd)........................... 5.000 07/01/27 4,157,360 755 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig Irvington Proj Tucson Elec Pwr Co Ser A Rfdg (FSA Insd)............................... 7.250 07/15/10 789,579 1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd).................. 6.000 09/01/12 2,027,212 1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd).................. 6.125 09/01/17 1,895,442 -------------- 23,318,513 --------------
See Notes to Financial Statements 9 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- ARKANSAS 0.8% $ 2,500 Arkansas St Dev Fin Auth Rev St Agy Fac Donaghey Plaza Proj (FSA Insd)................ 5.000% 06/01/29 $ 2,573,000 6,265 Little Rock, AR Sch Dist Ser B Rfdg (FSA Insd)......................................... 5.500 02/01/25 6,705,179 -------------- 9,278,179 -------------- CALIFORNIA 10.3% 4,000 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Pool Ser A (XLCA Insd)........................ 5.250 09/01/35 4,204,520 1,800 California Ed Fac Auth Rev Occidental College Ser A (MBIA Insd) (b)......................... 5.000 10/01/33 1,869,318 3,500 California Ed Fac Auth Rev Occidental College Ser A (MBIA Insd) (b)......................... 5.000 10/01/36 3,620,575 10,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd) (c).............................. 5.500 05/01/16 11,064,900 5,000 California St Dept Wtr Res Pwr Ser A (XLCA Insd)................................... 5.375 05/01/17 5,431,600 3,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)......................... 5.375 10/01/20 3,215,820 3,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)......................... 5.000 10/01/22 3,111,030 5,000 California Stwide Cmnty Depooled Fin Pg Ser 2004A (FSA Insd).............................. 5.250 10/01/24 5,317,100 3,000 California Stwide Cmnty Pooled Fin Pg Ser 2004A (FSA Insd).............................. 5.000 10/01/29 3,097,350 4,000 California Stwide Cmnty Pooled Fin Pg Ser 2004A (FSA Insd).............................. 5.250 10/01/34 4,202,760 2,980 California Stwide Cmnty Pooled Fin Pg Ser 2004C (FSA Insd) (a).......................... 5.000 10/01/29 3,069,758 4,020 Chaffey, CA Un High Sch Dist Rfdg (FGIC Insd) (a)............................... 5.000 08/01/19 4,285,400 425 Earlimart, CA Elem Sch Dist Ser 1 (AMBAC Insd).................................. 6.700 08/01/21 541,165 3,105 El Dorado, CA Irr Dist Ctf Ser A (FGIC Insd)......................................... 5.000 03/01/21 3,233,547 265 Golden West Sch Fin Auth CA Rev Ser A Rfdg (MBIA Insd) (a)............................... 5.750 08/01/19 309,035 690 Jurupa, CA Univ Sch Dist Election 2001 (FGIC Insd)................................... 5.000 08/01/26 715,896 1,190 Lancaster, CA Redev Agy Tax Alloc Comb Fire Prot Fac Proj Rfdg (XLCA Insd) (a)............ 5.250 12/01/18 1,280,035 1,245 Lancaster, CA Redev Agy Tax Alloc Proj Areas Sheriffs Fac (XLCA Insd) (a).................. 5.250 12/01/17 1,344,314 1,375 Lancaster, CA Redev Agy Tax Alloc Proj Areas Sheriffs Fac (XLCA Insd) (a).................. 5.250 12/01/19 1,473,409 3,000 Long Beach, CA Bd Fin Auth Rev Redev Hsg Gas Util Ser A1 (AMBAC Insd)...................... 5.000 08/01/40 3,053,880 4,000 Los Angeles Cnty, CA Pub Wk Master Proj Ser A Rfdg (MBIA Insd).............................. 5.000 12/01/26 4,159,120
10 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $ 2,000 Los Angeles, CA Cmnty College Election 2001 Ser A Rfdg (FSA Insd)......................... 5.000% 08/01/25 $ 2,092,740 10,000 Los Angeles, CA Cmnty College Election 2001 Ser A Rfdg (FSA Insd)......................... 5.000 06/01/26 10,446,800 2,165 North Monterey Cnty, CA Uni Sch Dist Election 2002 Ser B (FGIC Insd)........................ 4.750 08/01/29 2,186,910 2,070 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd) (a).............................. 5.250 10/01/23 2,206,247 5,000 Palm Springs, CA Fin Lease Rev Convention Ctr Proj Ser A (MBIA Insd)........................ 5.500 11/01/29 5,497,350 2,475 Poway, CA Ctf Part City Office Bldg Proj (AMBAC Insd).................................. 5.000 01/01/23 2,562,417 2,250 Riverside, CA Ctf Part (AMBAC Insd) (a)....... 5.000 09/01/23 2,335,207 3,770 San Diego Cnty, CA Ctf Part Edgemont Proj & Regl Sys Rfdg (AMBAC Insd) (a)................ 5.000 02/01/21 3,956,426 9,085 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd)... 5.375 03/01/18 9,862,585 3,000 San Marcos, CA Pub Fac Auth Rev Sr Tax Increment Proj Area 3-A (AMBAC Insd).......... 5.000 10/01/34 3,078,750 2,785 Santa Monica, CA Cmnty College Ser A Rfdg (AMBAC Insd).................................. 5.000 02/01/27 2,872,087 2,000 South Tahoe CA Jt Pwr Fin Redev Proj Area No 1 Ser A Rfdg (AMBAC Insd) (b)................... 5.000 10/01/35 2,010,980 1,950 Vallejo City, CA Uni Sch Ser A Rfdg (MBIA Insd)......................................... 5.900 08/01/25 2,292,361 2,000 William S Hart CA Jt Sch Fin Auth Spl Tax Rev Cmnty Fac Rfdg (Prerefunded @ 9/01/05) (FSA Insd)......................................... 6.500 09/01/14 2,072,620 -------------- 122,074,012 -------------- COLORADO 4.4% 3,745 Colorado Ed & Cultural Fac Charter Sch Aurora Academy (XLCA Insd) (a)....................... 5.250 02/15/34 3,927,456 11,850 Denver, CO City & Cnty Arpt Rev Ser A (MBIA Insd)......................................... 5.700 11/15/25 12,268,542 3,605 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd)......................................... 5.750 11/15/16 4,006,885 4,310 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd)......................................... 5.750 11/15/17 4,774,058 4,305 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd)......................................... 5.750 11/15/18 4,758,704 5,145 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd)......................................... 5.750 11/15/20 5,675,501 3,165 Denver, CO Convention Ctr Sr Ser A (XLCA Insd)................................... 5.000 12/01/17 3,331,890 2,000 Fremont Cnty, CO Ctf Part & Impt Ser A Rfdg (MBIA Insd)................................... 5.250 12/15/26 2,118,000 4,300 Mesa Cnty, CO Vly Sch Dist No 51 Grand Jct Ser A (MBIA Insd)............................. 5.000 12/01/20 4,554,990
See Notes to Financial Statements 11 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- COLORADO (CONTINUED) $ 1,175 Thornton, CO Ctf Part (AMBAC Insd)............ 5.375% 12/01/19 $ 1,273,277 3,080 Thornton, CO Ctf Part (AMBAC Insd) (a)........ 5.375 12/01/21 3,326,030 1,650 Thornton, CO Ctf Part (AMBAC Insd)............ 5.375 12/01/22 1,778,667 -------------- 51,794,000 -------------- DISTRICT OF COLUMBIA 1.1% 1,000 District of Columbia Ctf Part Dist Pub Safety & Emergency (AMBAC Insd)...................... 5.500 01/01/19 1,082,500 2,000 District of Columbia Ctf Part Dist Pub Safety & Emergency (AMBAC Insd)...................... 5.500 01/01/20 2,161,980 10,000 Metropolitan WA DC Arpt Auth Ser A (AMT) (MBIA Insd) (b)............................... 5.000 10/01/35 10,048,400 -------------- 13,292,880 -------------- FLORIDA 6.8% 1,000 Brevard Cnty, FL Sch Brd Ctf Part Ser A (AMBAC Insd)......................................... 5.400 07/01/12 1,107,510 500 Dade Cnty, FL Aviation Rev Ser B (MBIA Insd)......................................... 5.600 10/01/26 525,990 1,000 Dade Cnty, FL Ed Fac Auth Rev Exchanged From Univ of Miami Ser B (MBIA Insd)............... 5.750 04/01/20 1,047,430 750 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC Insd)... 5.375 10/01/16 803,655 1,250 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)......................................... 5.950 07/01/20 1,273,500 1,000 Escambia Cnty, FL Util Auth Util Sys Rev (FGIC Insd)......................................... 5.250 01/01/24 1,060,010 1,000 Florida Intergovnmtl Fin Ser C1 (AMBAC Insd)......................................... 5.125 02/01/31 1,027,820 575 Florida Muni Ln Council Rev Ser B (MBIA Insd)................................... 5.750 11/01/14 641,688 1,185 Florida St Brd Ed Cap Outlay Pub Ed Ser C (FGIC Insd)................................... 5.000 06/01/23 1,228,229 2,000 Florida St Brd Ed Cap Outlay Pub Ed Ser C (Prerefunded @ 6/01/10) (FGIC Insd)........... 5.750 06/01/29 2,243,540 1,250 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)......................................... 6.000 07/01/12 1,406,150 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)......................................... 6.000 07/01/14 1,124,920 2,750 Florida St Brd Ed Lottery Rev Ser B (FGIC Insd)......................................... 5.250 07/01/13 2,934,607 750 Florida St Brd Regt Hsg Rev (MBIA Insd)....... 5.750 07/01/14 834,015 1,365 Florida St Correctional Privatization Commn Ctf Part (MBIA Insd).......................... 5.375 08/01/14 1,494,156 1,750 Florida St Div Bd Fin Dept Gen Svc Rev Dept Environmental Prot Presvtn 2000 Ser A (AMBAC Insd)......................................... 5.000 07/01/12 1,835,820 1,500 Florida St Div Bd Fin Dept Gen Svc Rev Dept Environmental Prot Presvtn 2000 Ser B (FSA Insd).................................... 5.250 07/01/11 1,600,695 1,340 Gulf Breeze, FL Rev Loc Govt (FGIC Insd) (d)........................................... 5.150 12/01/20 1,434,577 500 Gulf Breeze, FL Rev Loc Govt (Variable Rate Coupon) (FGIC Insd)........................... 5.650 12/01/20 530,475 1,000 Indian River Cnty, FL Hosp Rev Rfdg (FSA Insd)......................................... 6.100 10/01/18 1,063,120
12 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 1,750 Jea, FL Wtr & Swr Sys Rev Ser A (MBIA Insd)... 5.375% 10/01/30 $ 1,810,970 1,000 Key West, FL Util Brd Elec Rev Cap Apprec Ser D (Escrowed to Maturity) (AMBAC Insd)......... * 10/01/13 681,590 1,000 Miami-Dade Cnty, FL Hlth Fac Miami Childrens Hosp Ser A Rfdg (AMBAC Insd).................. 5.125 08/15/26 1,035,930 1,000 Orange Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).................................. 5.250 08/01/14 1,091,660 4,000 Orange Cnty, FL Sch Brd Ctf Ser B (AMBAC Insd).................................. 5.000 08/01/25 4,148,520 1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive Universal Blvd Rfdg (AMBAC Insd).............. 5.125 04/01/20 1,059,890 4,180 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd) (a).............................. 5.000 08/01/18 4,412,826 800 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd)......................................... 5.125 08/01/26 831,144 1,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A (Prerefunded @ 6/01/11) (AMBAC Insd).......... 5.500 08/01/16 1,114,190 2,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A Rfdg (FSA Insd).................................... 5.000 08/01/21 2,108,020 1,500 Palm Beach Cnty, FL Sch Brd Ctf Ser A Rfdg (FSA Insd).................................... 5.000 08/01/22 1,575,900 4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA Insd).................................... 5.000 08/01/21 4,153,880 4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA Insd).................................... 5.000 08/01/22 4,143,720 750 Polk Cnty, FL Sch Brd Ctf Part Master Lease Ser A (FSA Insd).............................. 5.500 01/01/16 818,332 1,000 Port Saint Lucie, FL Spl Assmt Rev Util Svc Area No 3 & 4A (MBIA Insd).................... 5.000 10/01/18 1,052,050 1,000 Reedy Creek, FL Impt Dist FL Ser 2 Rfdg (MBIA Insd)......................................... 5.500 10/01/13 1,093,130 535 Saint Johns Cnty, FL Indl Dev Auth Professional Golf Proj Rfdg (MBIA Insd)....... 5.250 09/01/12 586,130 1,000 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA Insd).................................... 5.000 07/01/21 1,038,090 3,245 Santa Rosa Bay Brdg Auth FL Rev Cap Apprec (MBIA Insd) (a)............................... * 07/01/18 1,752,300 4,000 Sunrise, FL Util Sys Rev Rfdg (AMBAC Insd).... 5.200 10/01/22 4,362,800 10,000 Tallahassee, FL Hlth Fac Rev Tallahassee Mem Regl Med Ser A Rfdg (MBIA Insd) (c)........... 6.625 12/01/13 10,232,800 1,000 Village Ctr Cmnty Dev Dist FL Ser A (MBIA Insd)................................... 5.200 11/01/25 1,051,860 3,735 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry Riddle Ser B Rfdg (AMBAC Insd)................ 5.250 10/15/19 4,014,864
See Notes to Financial Statements 13 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 1,069,030 500 Volusia Cnty, FL Hlth Fac Auth Rev Hosp Fac Mem Hlth Impt & Rfdg (AMBAC Insd)............. 5.750 11/15/13 511,275 -------------- 80,968,808 -------------- GEORGIA 2.6% 1,460 Athens, GA Hsg Auth Student East Campus Hsg Rfdg (AMBAC Insd)............................. 5.250 12/01/18 1,574,800 14,690 Georgia Muni Elec Auth Pwr Rev Ser Y (AMBAC Insd)......................................... 6.400 01/01/13 16,882,336 9,590 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA Insd)................................... 6.500 01/01/17 11,400,112 860 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (AMBAC Insd)..................... 6.400 01/01/13 990,066 410 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (MBIA Insd)...................... 6.500 01/01/17 488,888 -------------- 31,336,202 -------------- ILLINOIS 15.0% 4,230 Berwyn, IL Rfdg (AMBAC Insd).................. 5.000 12/01/13 4,563,366 1,715 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd)......................................... * 01/01/19 879,058 2,595 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd) (a)............................... * 01/01/20 1,257,926 5,775 Chicago, IL Brd Ed Cap Apprec Sch Reform B 1 (FGIC Insd)................................... * 12/01/15 3,558,959 2,845 Chicago, IL Brd Ed Cap Apprec Sch Reform B 1 (FGIC Insd)................................... * 12/01/19 1,396,724 1,500 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd)................................... * 12/01/19 736,410 1,020 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd)................................... * 12/01/25 351,074 8,000 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd)................................... * 12/01/29 2,203,600 3,250 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd)................................... * 12/01/30 849,615 2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (e)............................... 0/5.700 01/01/25 2,024,900 2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (e)............................... 0/5.750 01/01/29 2,016,960 5,925 Chicago, IL Midway Arpt Rev Second Lien Ser B Rfdg (AMBAC Insd) (a)......................... 5.000 01/01/21 6,172,961 6,220 Chicago, IL Midway Arpt Rev Second Lien Ser B Rfdg (AMBAC Insd) (a)......................... 5.000 01/01/22 6,460,341 1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser A Rfdg (MBIA Insd)............. 5.000 01/01/29 1,025,140
14 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 2,840 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd) (a)......... 5.250% 01/01/21 $ 3,010,372 2,975 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd) (a)......... 5.250 01/01/22 3,144,634 3,120 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd)............. 5.250 01/01/23 3,293,254 3,280 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd) (a)......... 5.250 01/01/24 3,452,430 5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd)............. 5.000 01/01/34 5,090,050 8,750 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 239-2 (Inverse Fltg) (Acquired 08/18/03, Cost $9,383,563) (AMT) (FSA Insd) (f).............. 9.070 01/01/20 10,415,825 10,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 239-3 (Inverse Fltg) (Acquired 08/18/03, Cost $10,642,295) (AMT) (FSA Insd) (a) (f)......... 9.070 01/01/21 11,858,300 2,500 Chicago, IL Pk Dist Ser C (FGIC Insd)......... 5.500 01/01/19 2,730,675 2,000 Chicago, IL Proj Ser A Rfdg (FSA Insd)........ 5.000 01/01/23 2,086,920 2,495 Chicago, IL Proj Ser A Rfdg (FSA Insd)........ 5.000 01/01/24 2,595,424 4,185 Chicago, IL Proj Ser A Rfdg (FSA Insd) (a).... 5.000 01/01/26 4,330,010 10,000 Chicago, IL Proj Ser A Rfdg (FGIC Insd)....... 5.375 01/01/34 10,582,600 5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd)....... 5.500 01/01/38 5,388,750 5,000 Chicago, IL Proj Ser A Rfdg (AMBAC Insd)...... 5.625 01/01/39 5,486,850 1,000 Cicero, IL Tax Increment Ser A (XLCA Insd).... 5.250 01/01/21 1,067,960 2,055 Cook Cnty, IL Cmnty Cons Sch Dist No 015 Palatine Cap Apprec (FSA Insd)................ * 12/01/10 1,654,994 1,505 Cook Cnty, IL Sch Dist No 100 Berwyn South (FSA Insd) (a)................................ 8.200 12/01/14 2,005,518 1,775 Cook Cnty, IL Sch Dist No 100 Berwyn South (FSA Insd) (a)................................ 8.100 12/01/16 2,396,960 2,605 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd) (a)............................... * 12/01/17 1,426,706 2,995 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd) (a)............................... * 12/01/18 1,551,710 4,210 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd) (a)..................................... * 12/01/19 2,063,910 4,050 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd)......................................... * 12/01/20 1,876,851 3,000 Du Page Cnty, IL Cmnty High Sch (FSA Insd).... 5.600 01/01/22 3,316,950 2,000 Du Page Cnty, IL Cmnty High Sch Rfdg (FSA Insd).................................... 5.000 12/01/17 2,128,380 1,860 Grundy Kendall & Will Cntys (AMBAC Insd)...... 5.500 05/01/20 2,013,450 1,180 Grundy Kendall & Will Cntys (AMBAC Insd)...... 5.500 05/01/21 1,277,350 2,000 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford Sch 205 (FSA Insd)................... 6.650 02/01/11 2,316,540
See Notes to Financial Statements 15 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 5,025 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford Sch 205 (FSA Insd)................... 6.650% 02/01/12 $ 5,346,299 4,800 Illinois Fin Auth Rev Swedish American Hosp (AMBAC Insd).................................. 5.000 11/15/31 4,910,160 2,000 Illinois Med Dist (MBIA Insd)................. 5.250 06/01/32 2,073,160 3,500 Illinois Muni Elec Agy Pwr Supply Sys Rev Rfdg (FSA Insd).................................... 5.000 02/01/21 3,640,105 555 Kane Cook & Du Page Cntys IL Ser A (FGIC Insd)................................... 7.000 12/15/11 662,082 1,000 Lake Cnty, IL Cmnty Cons Sch Dist No 50 Woodland (FGIC Insd).......................... 5.000 01/01/20 1,052,360 1,200 Lake Cnty, IL Cmnty Cons Sch Dist No 50 Woodland Cap Apprec Ser B (FGIC Insd)......... * 12/01/14 779,220 6,790 Lake Cnty, IL Cmnty Unit Sch Dist No 60 Waukegan Cap Apprec Ser A (FSA Insd).......... * 12/01/17 3,718,747 3,025 Lake Cnty, IL Cmnty Unit Sch Dist No 95 Lake Zurich Cap Apprec (FGIC Insd)................. * 12/01/15 1,860,345 1,000 Madison & St Clair Cnty, IL Sch Dist No 10 Collinsville Rfdg (FGIC Insd)................. 5.000 02/01/21 1,048,640 3,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No 158 Cap Apprec (FGIC Insd).................... * 01/01/17 1,716,210 4,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No 158 Cap Apprec (FGIC Insd).................... * 01/01/18 2,165,840 2,080 McHenry Cnty, IL Cmnty High Sch Dist No 154 Cap Apprec (FGIC Insd)........................ * 01/01/16 1,261,000 1,000 McHenry Cnty, IL Consv Dist Ser A (Prerefunded @ 2/01/11) (FGIC Insd)........................ 5.500 02/01/16 1,106,760 1,330 McHenry Cnty, IL Consv Dist Ser A (Prerefunded @ 2/01/11) (FGIC Insd)........................ 5.500 02/01/17 1,471,991 6,000 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expn Ser A (MBIA Insd)... 5.250 06/15/42 6,274,920 1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux Ser A (MBIA Insd)............................. * 04/01/20 479,540 5,000 University IL Univ Rev Aux Fac Sys Ser A (MBIA Insd)......................................... 5.000 04/01/26 5,177,150 1,495 Will Cnty, IL Sch Dist No 017 (AMBAC Insd) (a)........................................... 5.000 12/01/16 1,581,112 -------------- 178,386,048 -------------- INDIANA 3.3% 1,000 Ball St Univ IN Rev Student Fee Ser L (FSA Insd).................................... 5.500 07/01/20 1,134,940 2,000 Brownsburg, IN Sch Bldg First Mtg 1999 Ser A (FSA Insd).................................... 5.250 09/15/22 2,142,840 1,785 Center Grove, IN 2000 Bldg First Mtg (AMBAC Insd) (a).............................. 5.500 07/15/17 1,955,842 1,885 Center Grove, IN 2000 Bldg First Mtg (AMBAC Insd) (a).............................. 5.500 07/15/18 2,063,189
16 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 2,742,125 1,855 Hamilton Southeastern, IN Cons First Mtg (FSA Insd) (a)................................ 5.500 07/15/16 2,034,712 1,075 Hamilton Southeastern, IN Cons First Mtg (FSA Insd) (a)................................ 5.500 01/15/19 1,175,620 1,215 Indiana Bd Bk Spl Pgm Ser A (Escrowed to Maturity) (AMBAC Insd)........................ 9.750 08/01/09 1,396,594 2,335 Lake Cnty, IN Bldg Corp First Mtg (MBIA Insd) (a)............................... 5.750 08/01/11 2,578,657 1,550 Marion Cnty, IN Convention & Rec Lease Rent Ser A Rfdg (AMBAC Insd)....................... 5.000 06/01/21 1,611,520 1,605 Mount Vernon of Hancock Cnty First Mtg Ser B (AMBAC Insd) (a).............................. 5.500 07/15/16 1,760,492 1,695 Mount Vernon of Hancock Cnty First Mtg Ser B (AMBAC Insd) (a).............................. 5.500 07/15/17 1,857,228 4,000 New Albany Floyd Cnty, IN Sch First Mtg (FGIC Insd)......................................... 5.750 07/15/20 4,443,880 9,400 New Albany Floyd Cnty, IN Sch First Mtg (FGIC Insd)......................................... 5.125 01/15/27 9,777,598 2,130 Northwest Allen Cnty, IN First Mtg (MBIA Insd)......................................... 5.250 07/15/19 2,292,924 -------------- 38,968,161 -------------- IOWA 0.2% 2,375 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)............................... 5.750 07/01/17 2,540,419 -------------- LOUISIANA 2.8% 4,065 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev Lake Charles Mem Hosp Proj Ser A (Connie Lee Insd)............................. 6.375 12/01/12 4,597,312 5,530 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev Lake Charles Mem.......................... 6.500 12/01/18 6,709,660 Hosp Proj Ser A (Connie Lee Insd) 1,295 Lafayette, LA Pub Impt Sales Tax Rfdg (MBIA Insd)......................................... 5.000 03/01/20 1,368,051 8,345 Lafayette, LA Util Rev (MBIA Insd)............ 5.250 11/01/24 8,911,292 1,730 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd).............................. 5.375 12/01/16 1,888,606 2,035 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd) (a).......................... 5.375 12/01/17 2,218,761 2,150 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd) (a).......................... 5.375 12/01/18 2,339,415 2,265 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd) (a).......................... 5.375 12/01/19 2,459,564 2,395 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd) (a).......................... 5.375 12/01/20 2,594,001
See Notes to Financial Statements 17 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- LOUISIANA (CONTINUED) $ 1,625 New Orleans, LA Home Mtg Auth Single Family Mtg Rev 1985 Ser A (MBIA Insd)................ * 09/15/16 $ 493,854 -------------- 33,580,516 -------------- MASSACHUSETTS 0.5% 2,800 Massachusetts Muni Whsl Elec Co Nuclear Mix 1-A (MBIA Insd)........................... 5.250% 07/01/13 3,047,324 175 Massachusetts Muni Whsl Elec Co Proj No 6-A (MBIA Insd)................................... 5.250 07/01/16 187,707 2,500 Massachusetts St Dev Fin Agy Rev Clg Pharmacy & Allied Hlth Ser D (AGL Insd)................ 5.000 07/01/20 2,603,650 -------------- 5,838,681 -------------- MICHIGAN 2.1% 2,385 Caledonia, MI Cmnty Sch Rfdg (MBIA Insd) (b)........................................... 5.000 05/01/25 2,489,558 2,650 Chippewa Valley, MI Sch Bldg & Site (FSA Insd)......................................... 5.000 05/01/20 2,805,953 3,000 Chippewa Valley, MI Sch Bldg & Site (FSA Insd)......................................... 4.750 05/01/29 3,027,420 1,000 Detroit, MI Ser A-1 (AMBAC Insd).............. 5.250 04/01/24 1,060,700 2,000 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser A (FGIC Insd)................................... 5.000 07/01/26 2,078,760 1,400 Huron, MI Sch Dist (FSA Insd)................. 5.250 05/01/21 1,492,848 2,500 Michigan St Strategic Fd Detroit Edison Conv Rfdg (Variable Rate Coupon) (AMBAC Insd)...... 4.850 09/01/30 2,619,850 2,565 Rockford, MI Pub Sch Rfdg (FSA Insd) (a)...... 5.000 05/01/27 2,671,114 1,175 Waverly, MI Cmnty Sch Rfdg (FSA Insd)......... 5.000 05/01/20 1,244,149 2,675 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg (FGIC Insd)................................... 5.375 12/01/17 2,898,202 2,840 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg (FGIC Insd)................................... 5.375 12/01/20 3,061,066 -------------- 25,449,620 -------------- MISSISSIPPI 0.1% 1,000 Harrison Cnty, MS Wastewtr Mgmt & Solid Wastewtr Treatment Fac Ser A Rfdg (FGIC Insd)......................................... 8.500 02/01/13 1,309,660 -------------- MISSOURI 0.5% 1,170 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A (FSA Insd).................................... 5.500 03/01/16 1,274,785 1,225 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A (FSA Insd).................................... 5.500 03/01/17 1,333,364 1,630 Saint Louis Cnty MO Regl Conv & Sports Complex Auth Convtn & Sports Fac Rfdg (AMBAC Insd).... 5.250 08/15/17 1,750,278 1,590 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A (MBIA Insd)................................... 5.375 07/01/17 1,718,520 -------------- 6,076,947 -------------- NEBRASKA 0.2% 1,680 Dodge Cnty, NE Sch Dist No 001 Rfdg (FSA Insd)......................................... 5.000 12/15/17 1,790,947 --------------
18 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- NEVADA 1.6% $ 5,020 Clark Cnty, NV Arpt Rev Rols RR II 292-3 (Inverse Fltg) (Acquired 06/30/04, Cost $5,469,977) (AMT) (FGIC Insd) (f)............. 5.125% 07/01/22 $ 5,752,468 10,000 Director St, NV Dept Business & Ind Las Vegas Monorail Proj First Tier (AMBAC Insd)......... 5.625 01/01/32 10,911,800 2,500 Reno, NV Cap Impt Rev (FGIC Insd)............. 5.125 06/01/26 2,589,550 -------------- 19,253,818 -------------- NEW HAMPSHIRE 0.2% 2,500 New Hampshire St Tpk Sys Rev Ser C Rfdg (Inverse Fltg) (FGIC Insd).................... 11.401 11/01/17 2,882,575 -------------- NEW JERSEY 2.2% 4,000 Essex Cnty, NJ Impt Auth Rev Cnty Gtd Proj Consldtn Rfdg (MBIA Insd)..................... 5.125 10/01/22 4,237,560 3,625 Morristown, NJ Rfdg (FSA Insd)................ 6.400 08/01/14 3,743,465 4,000 New Jersey Econ Dev Auth Rev Motor Vehicle Sur Rev Ser A (MBIA Insd)......................... 5.000 07/01/23 4,191,360 10,000 New Jersey St Trans Corp Ctf Fed Trans Admin Grants Ser A (AMBAC Insd)..................... 5.500 09/15/13 11,110,900 2,760 Newark, NJ Hsg Auth Port Auth Newark Marine Term (MBIA Insd).............................. 5.500 01/01/28 3,000,258 -------------- 26,283,543 -------------- NEW YORK 1.5% 5,470 New York City Hlth & Hosp Hlth Sys Ser A (FSA Insd)......................................... 5.000 02/15/21 5,669,108 3,000 New York City Ser H (CIFG Insd)............... 5.000 08/01/14 3,224,820 5,000 New York City Ser I (MBIA Insd)............... 5.000 08/01/17 5,323,850 3,105 New York St Dorm Auth Rev Insd Brooklyn Law Sch Ser B (XLCA Insd) (a)..................... 5.375 07/01/21 3,382,494 -------------- 17,600,272 -------------- NORTH CAROLINA 1.7% 940 North Carolina Cap Fac Fin Johnson & Wales Univ Proj Ser A (XLCA Insd)................... 5.000 04/01/20 979,941 10,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)......................................... 5.250 01/01/18 10,785,200 2,835 North Carolina Muni Pwr Agy Ser A (MBIA Insd)......................................... 5.250 01/01/19 3,048,816 5,285 University NC Sys Pool Rev Ser A (AMBAC Insd) (b).............................. 5.000 04/01/22 5,558,974 -------------- 20,372,931 -------------- NORTH DAKOTA 0.9% 5,000 Mercer Cnty, ND Pollutn Ctl Rev Antelope Vly Station Rfdg (AMBAC Insd)..................... 7.200 06/30/13 5,949,100 5,000 Oliver Cnty, ND Pollutn Ctl Rev Square Butte Elec Coop Ser A Rfdg (AMBAC Insd)............. 5.300 01/01/27 5,243,150 -------------- 11,192,250 --------------
See Notes to Financial Statements 19 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- OHIO 0.5% $ 1,000 Chillicothe, OH City Sch Dist Sch Impt (FGIC Insd).............................. 5.250% 12/01/26 $ 1,067,500 5,000 Columbus, OH City Sch Dist Sch Fac Constr & Impt (FSA Insd)............................... 5.250 12/01/27 5,341,550 -------------- 6,409,050 -------------- OKLAHOMA 2.8% 2,990 Jenks, OK Aquarium Auth Rev Rfdg (MBIA Insd)......................................... 5.250 07/01/19 3,237,991 1,480 Jenks, OK Aquarium Auth Rev Rfdg (MBIA Insd)......................................... 5.250 07/01/33 1,576,984 1,000 McAlester, OK Pub Wks Auth Util Cap Apprec (FSA Insd).................................... * 02/01/34 229,010 8,320 McAlester, OK Pub Wks Auth Util Cap Apprec Ser A (FSA Insd).............................. * 02/01/30 2,105,459 5,660 Mustang, OK Impt Auth Util Rev (FSA Insd)..... 5.800 10/01/30 6,276,487 2,020 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser A (FSA Insd).................................... 5.000 07/01/17 2,118,576 2,400 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev (FGIC Insd) (b)............................... 5.250 10/01/29 2,508,120 2,000 Oklahoma Colleges Brd Regt Stad Univ Cent OK Ser B (AMBAC Insd)............................ 5.500 06/01/24 2,190,420 1,750 Sapulpa, OK Muni Auth Cap Impt Rev Rfdg (Prerefunded @ 07/01/10) (FSA Insd)........... 5.750 07/01/30 1,940,715 2,000 Tulsa, OK Cmnty College Rev (AMBAC Insd)...... 5.500 07/01/22 2,195,040 8,260 Tulsa, OK Tulsa Indl Auth Rev Univ Tulsa Ser A (MBIA Insd)................................... 5.375 10/01/31 8,819,945 -------------- 33,198,747 -------------- OREGON 0.4% 4,835 Oregon St Dept Admin Ser B Rfdg (MBIA Insd)... 5.250 05/01/17 5,196,416 -------------- PENNSYLVANIA 4.2% 5,000 Allegheny Cnty, PA Hosp Dev Auth Rev Insd Hlth Sys Ser A (MBIA Insd)......................... 6.500 11/15/30 5,748,650 4,875 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh Mercy Hlth Sys Inc (Escrowed to Maturity) (AMBAC Insd)........................ 5.625 08/15/26 5,110,706 10,000 Harrisburg, PA Auth Res Gtd Sub Ser D-2 (Variable Rate Coupon) (FSA Insd)............. 5.000 12/01/33 10,682,000 3,000 Lycoming Cnty, PA Auth College Rev PA College of Technology (AMBAC Insd).................... 5.350 07/01/26 3,187,020 1,375 Pennsylvania St Higher Ed Fac Auth Rev St Sys Higher Ed Ser P (AMBAC Insd).................. 5.000 12/15/16 1,435,046 2,990 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd).................. 5.250 08/01/18 3,201,064 4,555 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd).................. 5.250 08/01/21 4,840,371 1,485 Philadelphia, PA Gas Wks Rev Eighteenth Ser (AGL Insd).................................... 5.250 08/01/20 1,570,774
20 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) $ 3,665 Philadelphia, PA Gas Wks Rev Fifth Ser A-1 (AGL Insd) (a)................................ 5.250% 09/01/17 $ 3,895,638 5,000 Philadelphia, PA Redev Auth Rev Neighborhood Transformation Ser C (FGIC Insd).............. 5.000 04/15/29 5,157,250 5,000 State Pub Sch Bldg Auth PA Sch Lease Philadelphia Sch Dist Proj (FSA Insd)......... 5.250 06/01/26 5,286,850 -------------- 50,115,369 -------------- SOUTH CAROLINA 0.8% 2,430 Columbia, SC Ctf Part Tourism Dev Fee Pledge (AMBAC Insd) (a).............................. 5.250 06/01/19 2,606,807 6,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser A (AMBAC Insd)......... 5.200 11/01/27 6,805,500 -------------- 9,412,307 -------------- SOUTH DAKOTA 1.3% 1,065 Minnehaha Cnty, SD Ctf Ltd Tax (FSA Insd) (a)........................................... 5.000 12/01/14 1,146,984 1,245 Minnehaha Cnty, SD Ctf Ltd Tax (FSA Insd) (a)........................................... 5.000 12/01/15 1,341,986 1,455 Rapid City, SD Sales Tax Rev Rfdg (AMBAC Insd).................................. 5.500 06/01/12 1,603,366 5,205 South Dakota St Lease Rev Tr Ctf Ser A (FSA Insd).................................... 6.625 09/01/12 6,043,005 4,000 South Dakota St Lease Rev Tr Ctf Ser A (FSA Insd).................................... 6.700 09/01/17 4,936,480 -------------- 15,071,821 -------------- TEXAS 12.9% 1,165 Alamo, TX Cmnty College Dist Combined Fee Rfdg (FSA Insd).................................... 5.000 11/01/22 1,203,527 2,120 Austin, TX Arpt Sys Rev Pr Lien Rfdg (MBIA Insd)................................... 5.000 11/15/12 2,272,110 2,680 Austin, TX Util Sys Rev Rfdg (FSA Insd)....... 5.000 11/15/11 2,795,160 8,765 Austin, TX Util Sys Rev Ser A Rfdg (MBIA Insd)......................................... * 11/15/10 7,093,164 5,000 Brazos Riv Auth TX Rev Houston Ind Inc Proj Ser C (Variable Rate Coupon) (AMBAC Insd)..... 5.125 05/01/19 5,217,450 2,000 Colorado Riv, TX Muni Wtr Dist Sys Rfdg (AMBAC Insd)......................................... 5.375 01/01/19 2,157,100 3,055 Dallas Fort Worth, TX Intl Arpt Rols RR II 291-1 (Inverse Fltg) (Acquired 07/19/04, Cost $3,426,838) (AMT) (FSA Insd) (a) (f).......... 8.563 11/01/19 3,523,698 2,000 Dallas Fort Worth, TX Intl Arpt Rols RR II 291-2 (Inverse Fltg) (Acquired 07/19/04, Cost $2,155,544) (AMT) (FSA Insd) (a) (f).......... 8.309 11/01/21 2,235,700 5,000 El Paso, TX Ctf Oblig (FSA Insd).............. 5.750 08/15/25 5,251,750 4,500 Harris Cnty, TX Toll Rd Sr Lien Rfdg (MBIA Insd)................................... 5.125 08/15/17 4,719,375 4,605 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)......................................... 5.500 07/01/17 5,034,186 2,000 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)......................................... 5.500 07/01/18 2,183,780
See Notes to Financial Statements 21 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 5,000 Houston, TX Hotel Occupancy Convention & Entmt Ser A Rfdg (AMBAC Insd)....................... 5.375% 09/01/14 $ 5,451,050 2,000 Houston, TX Pub Impt Ser A Rfdg (MBIA Insd)... 5.375 03/01/18 2,172,420 22,500 Houston, TX Util Sys Rev First Lien Ser A Rfdg (FGIC Insd)................................... 5.250 05/15/23 23,914,350 12,400 Houston, TX Wtr & Swr Sys Rev Cap Apprec Ser A Rfdg (Escrowed to Maturity) (FSA Insd)......................................... * 12/01/20 5,888,760 7,930 Lancaster, TX Indpt Sch Dist Rfdg (FSA Insd)......................................... 5.750 02/15/30 8,773,356 1,790 Laredo, TX Cmnty College Dist Combined Fee Rev Bldg Rfdg (AMBAC Insd)........................ 5.300 08/01/26 1,886,696 4,335 North Harris Cnty, TX Regl Wtr Sr Lien (FGIC Insd) (a)............................... 5.250 12/15/19 4,653,926 5,000 Port Arthur TX Indpt Sch Dist Sch Bldg (FGIC Insd) (b)............................... 5.250 02/15/35 5,243,600 2,220 Raven Hills, TX Higher Ed Corp Cardinal Vlg Llc Lamar Univ A (MBIA Insd).................. 5.500 08/01/28 2,397,356 2,000 San Antonio, TX Hotel Occupancy Rev Sub Lien Ser A Rfdg (AMBAC Insd)....................... 5.000 08/15/29 2,041,280 1,000 San Antonio, TX Indpt Sch Dist Pub Fac Corp Lease Rev (AMBAC Insd)........................ 5.850 10/15/10 1,058,250 1,750 Tarrant Cnty, TX Hlth Fac Dev Corp Hlth Sys Rev Ser B (Escrowed to Maturity) (FGIC Insd)......................................... 5.000 09/01/15 1,884,995 1,060 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA Insd)......................................... 5.250 03/01/18 1,135,737 2,000 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA Insd)......................................... 5.250 03/01/20 2,135,120 10,000 Texas St Tpk Auth Cent TX Tpk First Tier Ser A (AMBAC Insd).................................. 5.500 08/15/39 10,732,500 26,905 Texas St Tpk Auth Dallas Northtwy Rev George Bush Tpk (FGIC Insd).......................... 5.250 01/01/23 27,865,239 1,800 Tyler, TX Indpt Sch Dist (FSA Insd) (a)....... 5.000 02/15/27 1,860,138 -------------- 152,781,773 -------------- UTAH 0.3% 2,140 Murray City, UT Swr & Wtr Rev (AMBAC Insd).... 5.250 10/01/23 2,293,074 630 Provo, UT Elec Rev 1984 Ser A Rfdg (Escrowed to Maturity) (AMBAC Insd)..................... 10.375 09/15/15 849,234 -------------- 3,142,308 -------------- VIRGINIA 0.1% 880 Virginia St Hsg Dev Auth Comwlth Mtg Ser J Subser J-1 (MBIA Insd)........................ 5.200 07/01/19 892,487 -------------- WASHINGTON 8.8% 4,115 Chelan Cnty, WA Sch Dist No 246 (FSA Insd).... 5.000 12/01/21 4,285,649 2,990 Clark Cnty, WA Pub Util Dist No 001 Wtr Rev (FSA Insd).................................... 5.125 01/01/20 3,146,945 11,340 Energy Northwest WA Elec Rev Columbia Generating Ser A Rfdg (FSA Insd).............. 5.500 07/01/17 12,364,796
22 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- WASHINGTON (CONTINUED) $ 4,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)............................... 5.500% 07/01/17 $ 4,906,665 10,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (XLCA Insd).............................. 5.500 07/01/17 10,894,200 14,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)............................... 5.500 07/01/18 15,773,535 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser B Rfdg (FSA Insd)............................... 6.000 07/01/16 5,645,400 1,365 Energy Northwest WA Wind Proj (AMBAC Insd).... 5.000 07/01/23 1,408,011 5,240 Energy Northwest WA Wind Proj Rfdg (MBIA Insd) (a)............................... 5.000 07/01/22 5,454,211 1,215 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)........ 5.000 04/01/24 1,260,004 1,975 Fife, WA Wtr & Swr Rev (MBIA Insd)............ 5.125 04/01/24 1,995,046 1,160 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)........ 5.000 04/01/29 1,191,726 4,520 Goat Hill Ppty WA Lease Rev Govt Office Bldg Proj (MBIA Insd) (a).......................... 5.000 12/01/24 4,679,149 2,370 Goat Hill Ppty WA Lease Rev Govt Office Bldg Proj (MBIA Insd).............................. 5.000 12/01/25 2,445,959 2,500 Goat Hill Ppty WA Lease Rev Govt Office Bldg Proj (MBIA Insd).............................. 5.000 12/01/33 2,554,650 2,335 Grant Cnty, WA Pub Util Dist No 2 Rev Second Ser C Rfdg (AMBAC Insd) (a)................... 6.000 01/01/17 2,469,613 1,025 Grant Cnty, WA Pub Util Dist No 2 Rev Second Ser C Rfdg (AMBAC Insd) (a)................... 6.000 01/01/17 1,084,091 2,000 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA Insd)......................................... 5.500 03/01/18 2,170,300 2,565 Snohomish Cnty, WA Pub Util 1 (FSA Insd)...... 5.500 12/01/23 2,791,310 145 Snohomish Cnty, WA Pub Util 1 (FSA Insd)...... 5.000 12/01/24 149,601 2,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd).... 5.750 12/01/25 2,247,400 2,420 Spokane, WA Pub Fac Dist Hotel (MBIA Insd).... 5.750 12/01/26 2,717,079 3,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd).... 5.250 09/01/33 3,147,720 1,965 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC Insd) (a).............................. 5.375 12/01/18 2,125,206 2,075 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC Insd) (a).............................. 5.375 12/01/19 2,239,008 3,090 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev Ser A Rfdg (AMBAC Insd).............. 5.700 07/01/09 3,258,281 1,600 Washington St Ser R 99A Rfdg (FGIC Insd)...... 5.000 01/01/17 1,669,552 -------------- 104,075,107 -------------- WEST VIRGINIA 0.4% 1,530 West Virginia Econ Dev Auth Lease Rev Correctional Juvenile & Pub-A (MBIA Insd)..... 5.500 06/01/19 1,677,890 2,570 West Virginia Univ Rev Impt WV Univ Proj Ser C (FGIC Insd)................................... 5.000 10/01/26 2,673,494 -------------- 4,351,384 --------------
See Notes to Financial Statements 23 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- WISCONSIN 1.1% $ 1,350 Plover, WI Wtr Sys Rev (AMBAC Insd)........... 5.400% 12/01/16 $ 1,458,581 1,500 Plover, WI Wtr Sys Rev (AMBAC Insd)........... 5.500 12/01/18 1,624,365 1,405 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)..... 5.250 09/01/16 1,519,578 3,920 University WI Hosp & Clinics Auth Rev (FSA Insd).................................... 6.200 04/01/29 4,382,913 1,985 Waunakee, WI Cmnty Sch Dist Ser A Rfdg (FGIC Insd)......................................... 5.250 04/01/24 2,105,490 1,215 Wilmont, WI Un High Sch Dist Ser B Rfdg (FSA Insd)......................................... 5.000 03/01/24 1,273,381 750 Wilmot, WI Un High Sch Dist Ser B Rfdg (FSA Insd)......................................... 5.000 03/01/23 788,865 -------------- 13,153,173 -------------- PUERTO RICO 0.3% 3,000 Puerto Rico Indl Tourist Ed Med & Environmental Ctl Fac Hosp Aux (MBIA Insd).... 6.250 07/01/16 3,068,190 -------------- TOTAL LONG-TERM INVESTMENTS 97.5% (Cost $1,101,901,091)...................................................... 1,157,214,709 SHORT-TERM INVESTMENTS 4.4% (Cost $52,450,000)......................................................... 52,450,000 -------------- TOTAL INVESTMENTS 101.9% (Cost $1,154,351,091)...................................................... 1,209,664,709 LIABILITIES IN EXCESS OF OTHER ASSETS (1.9%)................................ (22,619,860) -------------- NET ASSETS 100.0%........................................................... $1,187,044,849 ==============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) The Fund owns 100% of the bond issuance. (b) Security converts to a fixed coupon rate at a predetermined date. (c) Securities purchased on a when-issued or delayed delivery basis. (d) All or a portion of these securities have been physically segregated in connection with open futures contracts. (e) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (f) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 2.8% of net assets. 24 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued AGL--Assured Guaranty Ltd. AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax CIFG--CDC IXIS Financial Guaranty Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 25 VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2005 (Unaudited) ASSETS: Total Investments (Cost $1,154,351,091)..................... $1,209,664,709 Cash........................................................ 58,302 Receivables: Interest.................................................. 14,606,904 Fund Shares Sold.......................................... 775,953 Investments Sold.......................................... 30,837 Other....................................................... 250,817 -------------- Total Assets............................................ 1,225,387,522 -------------- LIABILITIES: Payables: Investments Purchased..................................... 33,336,090 Fund Shares Repurchased................................... 1,463, 805 Variation Margin on Futures............................... 964,437 Income Distributions...................................... 938,833 Distributor and Affiliates................................ 615,751 Investment Advisory Fee................................... 515,022 Trustees' Deferred Compensation and Retirement Plans........ 319,522 Accrued Expenses............................................ 189,213 -------------- Total Liabilities....................................... 38,342,673 -------------- NET ASSETS.................................................. $1,187,044,849 ============== NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $1,119,031,878 Net Unrealized Appreciation................................. 57,063,810 Accumulated Net Realized Gain............................... 9,780,642 Accumulated Undistributed Net Investment Income............. 1,168,519 -------------- NET ASSETS.................................................. $1,187,044,849 ============== NET ASSET VALUE PER COMMON SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $1,107,155,767 and 59,248,776 shares of beneficial interest issued and outstanding)............. $ 18.69 Maximum sales charge (4.75%* of offering price)......... .93 -------------- Maximum offering price to public........................ $ 19.62 ============== Class B Shares: Net asset value and offering price per share (Based on net assets of $60,123,320 and 3,221,347 shares of beneficial interest issued and outstanding)............. $ 18.66 ============== Class C Shares: Net asset value and offering price per share (Based on net assets of $19,765,762 and 1,059,742 shares of beneficial interest issued and outstanding)............. $ 18.65 ==============
* On sales of $100,000 or more, the sales charge will be reduced. 26 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2005 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 28,743,750 ------------ EXPENSES: Investment Advisory Fee..................................... 3,062,035 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $1,365,814, $317,445 and $99,192, respectively)............................................. 1,782,451 Shareholder Services........................................ 389,455 Legal....................................................... 54,790 Custody..................................................... 48,966 Trustees' Fees and Related Expenses......................... 15,531 Other....................................................... 259,294 ------------ Total Expenses.......................................... 5,612,522 Less Credits Earned on Cash Balances.................... 11,729 ------------ Net Expenses............................................ 5,600,793 ------------ NET INVESTMENT INCOME....................................... $ 23,142,957 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 6,671,043 Futures................................................... 2,320,717 ------------ Net Realized Gain........................................... 8,991,760 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 78,986,208 End of the Period: Investments............................................. 55,313,618 Futures................................................. 1,750,192 ------------ 57,063,810 ------------ Net Unrealized Depreciation During the Period............... (21,922,398) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(12,930,638) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 10,212,319 ============
See Notes to Financial Statements 27 VAN KAMPEN INSURED 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, 2005 SEPTEMBER 30, 2004 ------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 23,142,957 $ 49,280,969 Net Realized Gain...................................... 8,991,760 7,034,093 Net Unrealized Depreciation During the Period.......... (21,922,398) (6,185,703) -------------- -------------- Change in Net Assets from Operations................... 10,212,319 50,129,359 -------------- -------------- Distributions from Net Investment Income: Class A Shares....................................... (22,480,271) (45,586,240) Class B Shares....................................... (1,022,241) (2,382,337) Class C Shares....................................... (319,614) (699,272) -------------- -------------- (23,822,126) (48,667,849) -------------- -------------- Distributions from Net Realized Gain: Class A Shares....................................... (10,259,399) (13,949,578) Class B Shares....................................... (577,204) (936,852) Class C Shares....................................... (180,088) (284,764) -------------- -------------- (11,016,691) (15,171,194) -------------- -------------- Total Distributions.................................... (34,838,817) (63,839,043) -------------- -------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (24,626,498) (13,709,684) -------------- -------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold.............................. 36,017,020 72,538,790 Net Asset Value of Shares Issued Through Dividend Reinvestment......................................... 27,407,223 49,356,828 Cost of Shares Repurchased............................. (75,228,646) (201,234,835) -------------- -------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (11,804,403) (79,339,217) -------------- -------------- TOTAL DECREASE IN NET ASSETS........................... (36,430,901) (93,048,901) NET ASSETS: Beginning of the Period................................ 1,223,475,750 1,316,524,651 -------------- -------------- End of the Period (Including accumulated undistributed net investment income of $1,168,519 and $1,847,688, respectively)........................................ $1,187,044,849 $1,223,475,750 ============== ==============
28 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ---------------------------------------------------- 2005 2004 2003 2002 (a) 2001 2000 ----------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $ 19.07 $ 19.27 $ 19.65 $ 19.22 $ 18.27 $ 18.08 -------- -------- -------- -------- -------- -------- Net Investment Income............ .37 .76 .77 .81 .86 .91 Net Realized and Unrealized Gain/Loss...................... (.20) .02 (.23) .87 .98 .17 -------- -------- -------- -------- -------- -------- Total from Investment Operations... .17 .78 .54 1.68 1.84 1.08 -------- -------- -------- -------- -------- -------- Less: Distributions from Net Investment Income......................... .38 .75 .74 .81 .89 .88 Distributions from Net Realized Gain........................... .17 .23 .18 .44 -0- .01 -------- -------- -------- -------- -------- -------- Total Distributions................ .55 .98 .92 1.25 .89 .89 -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD........................... $ 18.69 $ 19.07 $ 19.27 $ 19.65 $ 19.22 $ 18.27 ======== ======== ======== ======== ======== ======== Total Return (b)................... 0.84%* 4.22% 2.90% 9.28% 10.28% 6.13% Net Assets at End of the Period (In millions)........................ $1,107.2 $1,137.2 $1,209.9 $1,244.3 $1,129.6 $1,086.6 Ratio of Expenses to Average Net Assets........................... .88% .87% .86% .87% .90% .90% Ratio of Net Investment Income to Average Net Assets............... 3.88% 3.99% 4.02% 4.30% 4.55% 5.10% Portfolio Turnover................. 25%* 40% 61% 54% 80% 69%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 4.27% to 4.30%. Per share, ratios and supplemental data for the periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchases. With respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 29 VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, -------------------------------------------- 2005 2004 2003 2002 (a) 2001 2000 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $19.05 $19.24 $19.63 $19.20 $18.26 $18.08 ------ ------ ------ ------ ------ ------ Net Investment Income................. .29 .62 .63 .66 .70 .78 Net Realized and Unrealized Gain/Loss........................... (.21) .02 (.24) .88 .99 .15 ------ ------ ------ ------ ------ ------ Total from Investment Operations........ .08 .64 .39 1.54 1.69 .93 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.............................. .30 .60 .60 .67 .75 .74 Distributions from Net Realized Gain................................ .17 .23 .18 .44 -0- .01 ------ ------ ------ ------ ------ ------ Total Distributions..................... .47 .83 .78 1.11 .75 .75 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD...... $18.66 $19.05 $19.24 $19.63 $19.20 $18.26 ====== ====== ====== ====== ====== ====== Total Return (b)........................ 0.46%* 3.43% 2.08% 8.47% 9.42% 5.25% Net Assets at End of the Period (In millions)............................. $ 60.1 $ 66.4 $ 82.6 $ 87.2 $ 49.2 $ 43.0 Ratio of Expenses to Average Net Assets................................ 1.63% 1.63% 1.62% 1.63% 1.69% 1.68% Ratio of Net Investment Income to Average Net Assets.................... 3.12% 3.23% 3.26% 3.53% 3.76% 4.34% Portfolio Turnover...................... 25%* 40% 61% 54% 80% 69%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 3.50% to 3.53%. Per share, ratios and supplemental data for the periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 30 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, -------------------------------------------- 2005 2004 2003 2002 (a) 2001 2000 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $19.04 $19.23 $19.62 $19.19 $18.25 $18.08 ------ ------ ------ ------ ------ ------ Net Investment Income................. .29 .62 .63 .67 .69 .79 Net Realized and Unrealized Gain/Loss........................... (.21) .02 (.24) .87 1.00 .13 ------ ------ ------ ------ ------ ------ Total from Investment Operations........ .08 .64 .39 1.54 1.69 .92 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.............................. .30 .60 .60 .67 .75 .74 Distributions from Net Realized Gain................................ .17 .23 .18 .44 -0- .01 ------ ------ ------ ------ ------ ------ Total Distributions..................... .47 .83 .78 1.11 .75 .75 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD...... $18.65 $19.04 $19.23 $19.62 $19.19 $18.25 ====== ====== ====== ====== ====== ====== Total Return (b)........................ 0.46%* 3.43% 2.08% 8.48% 9.42% 5.19% Net Assets at End of the Period (In millions)............................. $ 19.8 $ 19.9 $ 24.1 $ 22.1 $ 11.2 $ 5.4 Ratio of Expenses to Average Net Assets................................ 1.63% 1.63% 1.62% 1.63% 1.65% 1.68% Ratio of Net Investment Income to Average Net Assets.................... 3.11% 3.23% 3.25% 3.53% 3.80% 4.35% Portfolio Turnover...................... 25%* 40% 61% 54% 80% 69%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 3.50% to 3.53%. Per share, ratios and supplemental data for the periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 31 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Insured Tax Free Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors a high level of current income exempt from federal income taxes, with liquidity and safety of principal, primarily through investment in a diversified portfolio of insured municipal securities. The Fund commenced investment operations on December 14, 1984. The distribution of the Fund's Class B and Class C Shares commenced on May 3, 1993 and August 13, 1993, respectively. The Fund registered Class I Shares on August 31, 2004. There were no sales of Class I Shares for the period ended March 31, 2005. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2005, the Fund had $33,336,090 of when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies 32 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. At March 31, 2005, the cost and related gross unrealized appreciation and depreciation were as follows: Cost of investments for tax purposes........................ $1,153,299,884 ============== Gross tax unrealized appreciation........................... $ 59,622,580 Gross tax unrealized depreciation........................... (3,257,755) -------------- Net tax unrealized appreciation on investments.............. $ 56,364,825 ==============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains and a portion of futures gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2004 was as follows: Distributions paid from: Ordinary Income........................................... $ 1,429,233 Long-term capital gain.................................... 14,007,249 ----------- $15,436,482 -----------
As of September 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $1,832,228 Undistributed long-term capital gain........................ 9,263,391
F. INSURANCE EXPENSES The Fund typically invests in insured bonds. Any portfolio securities not specifically covered by a primary insurance policy are insured secondarily through the Fund's portfolio insurance policy. Insurance premiums are based on the daily balances of uninsured bonds in the portfolio of investments and are charged to expense on an accrual basis. The insurance policy guarantees the timely payment of principal and interest on the securities in the Fund's portfolio. G. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's custody fee was reduced by $11,729 as a result of credits earned on cash balances. 33 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... 0.525 Next $500 million........................................... 0.500 Next $500 million........................................... 0.475 Over $1.5 billion........................................... 0.450
For the six months ended March 31, 2005, the Fund recognized expenses of approximately $28,300 representing legal expenses provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $51,900 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $296,400, representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are also officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $229,011 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2005. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligations and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 34 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2005, capital aggregated $1,038,383,599, $60,053,399, and $20,594,880 for Classes A, B and C, respectively. For the six months ended March 31, 2005, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,653,284 $ 31,426,119 Class B................................................... 111,438 2,114,031 Class C................................................... 130,385 2,476,870 ---------- ------------ Total Sales................................................. 1,895,107 $ 36,017,020 ========== ============ Dividend Reinvestment: Class A................................................... 1,372,482 $ 25,978,071 Class B................................................... 56,994 1,077,366 Class C................................................... 18,622 351,786 ---------- ------------ Total Dividend Reinvestment................................. 1,448,098 $ 27,407,223 ========== ============ Repurchases: Class A................................................... (3,394,292) $(64,477,230) Class B................................................... (431,715) (8,205,539) Class C................................................... (134,189) (2,545,877) ---------- ------------ Total Repurchases........................................... (3,960,196) $(75,228,646) ========== ============
At September 30, 2004, capital aggregated $1,045,456,639, $65,067,541 and $20,312,101 for Classes A, B and C, respectively. For the year ended September 30, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 3,340,579 $ 63,441,645 Class B................................................... 247,730 4,719,271 Class C................................................... 229,874 4,377,874 ----------- ------------- Total Sales................................................. 3,818,183 $ 72,538,790 =========== ============= Dividend Reinvestment: Class A................................................... 2,446,565 $ 46,521,567 Class B................................................... 113,357 2,154,207 Class C................................................... 35,848 681,054 ----------- ------------- Total Dividend Reinvestment................................. 2,595,770 $ 49,356,828 =========== ============= Repurchases: Class A................................................... (8,970,968) $(170,303,857) Class B................................................... (1,167,114) (22,050,635) Class C................................................... (473,277) (8,880,343) ----------- ------------- Total Repurchases........................................... (10,611,359) $(201,234,835) =========== =============
35 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares seven years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2005 and the year ended September 30, 2004, 147,343 and 106,142 Class B Shares converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2005 and the year ended September 30, 2004, 30,727 and no Class C Shares converted to Class A Shares. Class B and Class C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be imposed on most redemptions made within six years of the purchase for Class B and one year of the purchase for Class C as detailed in the following schedule.
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, 2005, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $93,700 and CDSC on redeemed shares of approximately $54,700. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $293,546,145 and $303,661,724, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio and to manage 36 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued the portfolio's effective yield, maturity and duration. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Summarized below are the specific types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Notes and typically closes the contract prior to the delivery date. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts, for the six months ended March 31, 2005, were as follows:
CONTRACTS Outstanding at September 30, 2004........................... 1,435 Futures Opened.............................................. 5,162 Futures Closed.............................................. (4,223) ------ Outstanding at March 31, 2005............................... 2,374 ======
The futures contracts outstanding as of March 31, 2005, and the descriptions and unrealized appreciation/depreciation are a follows:
UNREALIZED CONTRACTS APPRECIATION SHORT CONTRACTS: US Treasury Notes 5-Year Futures, June 2005 (Current Notional Value of $107,094 per contract).................. 2,374 $1,750,192
B. INVERSE FLOATING RATE SECURITIES An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specified factor. As the floating rate rises, the coupon is reduced. Conversely as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. 37 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $1,573,500 and $59,800 for Class B and Class C Shares, respectively. This amount may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2005, are payments retained by Van Kampen of approximately $362,300 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $45,300. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. The consolidated action also names as defendants certain individual Trustees and Directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of certain Van Kampen funds; the named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of proprietary mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with 38 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued the consolidated complaint described in the preceding paragraph. Plaintiff has sought leave to file a second amended derivative compliant that alleges that the Adviser permitted or recklessly disregarded market timing and late trading in its proprietary mutual funds in order to increase assets under management and fees. However, pursuant to an agreement between the parties, that plaintiff's proposed second amended derivative complaint was withdrawn and the allegations regarding market timing and late trading asserted therein were filed in a separate complaint and coordinated with other cases related to market timing that have been centralized in a federal court. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 8. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 39 VAN KAMPEN INSURED TAX FREE INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* - President and Chief Executive Officer JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1173 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 40 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 32, 332, 532 TFIN SAR 5/05 RN05-01058P-Y03/05 (VAN KAMPEN INVESTMENTS LOGO) Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Strategic Municipal Income Fund performed during the semi-annual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2005. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/05
A SHARES B SHARES C SHARES 6/28/85 4/30/93 8/13/93 -------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL W/O SALES W/MAX 4.75% W/O SALES W/MAX 4.00% W/O SALES W/MAX 1.00% TOTAL RETURNS CHARGES SALES CHARGES CHARGES SALES CHARGES CHARGES SALES CHARGES Since Inception 6.58% 6.31% 4.77% 4.77% 4.34% 4.34% 10-year 5.03 4.52 4.46 4.46 4.30 4.30 5-year 5.34 4.32 4.54 4.29 4.68 4.68 1-year 6.24 1.23 5.44 1.44 5.40 4.40 6-month 3.98 -0.97 3.59 -0.41 3.56 2.56 -------------------------------------------------------------------------------------------------------- SEC Yield 4.96% 4.45% 4.41%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares seven years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005 Van Kampen Strategic Municipal Income Fund is managed by the Adviser's Municipal Fixed Income team.(1) Members of the team include Wayne D. Godlin, Managing Director of the Adviser; and Dennis S. Pietrzak and James D. Phillips, Executive Directors of the Adviser. MARKET CONDITIONS The six-month period ended March 31, 2005, was characterized by continued short-term interest rate increases, and the specter of rising inflation resulting from record-high crude oil prices. The Federal Open Market Committee (the "Fed") raised the federal funds target rate 100 basis points during the period through a series of four, "measured" 0.25 percent tightenings to 2.75 percent by the end of March. Although rates in the short and intermediate areas of the yield curve shifted upward as the Fed tightened, long-term interest rates fell as buyers did not seem deterred by the prospect of rising inflation. As a result, the yield curve (the difference between short and longer-term yields) flattened and the long end of the municipal market handily outperformed the shorter end. The municipal market in total posted positive returns during the period, though it was not uniformly strong. In contrast to the strong showing by longer-term bonds, shorter-term municipals were hampered by the Fed's tightening and turned in a slightly negative showing. Within the investment-grade segment of the market, yield differentials between BBB-rated municipals and AAA-rated securities were flat to slightly wider, though BBB-rated securities still outperformed high grades due to their higher coupons, while securities rated below investment grade strongly outperformed as investors sought out their higher yields. The Fed's interest rate hikes did not dampen investors' appetites for municipal bonds, as net inflows into municipal bond funds topped $700 million during the period. The supply of new issues was modest during the closing months of 2004 (the first half of the period) before soaring in the opening months of 2005 as long-term issuers rushed to bring securities to market in anticipation of additional interest rate increases in the near term. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The fund returned 3.98 percent for the six months ended March 31, 2005 (Class A shares, unadjusted for sales charge). In comparison, the fund's benchmark index, the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period. TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
-------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 3.98% 3.59% 3.56% 1.21% --------------------------------------------------------------
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND INDEX DEFINITIONS. The fund's relative outperformance was largely the result of its focus on higher-yielding municipal bonds. Despite ongoing increases to the federal funds target rate, yields on intermediate- and longer-maturity bonds remained relatively low for much of the period. As a result, investors hungry for yield income bid up the prices of higher-yielding securities over the period. This trend was a benefit to the fund, especially given its benchmark's lack of exposure to non-rated securities. During the first quarter of 2005, the fund also benefited from taking an initial limited position in tobacco bonds. We added these securities based on our evaluation of reduced litigation risk for the industry just prior to favorable developments in the federal courts. The sector appreciated early in 2005, and the portfolio gained as a result of its exposure. Not all of the fund's positions were so favorable. Based on our analysis of interest rates, the fund's duration (a measure of interest-rate exposure) was below that of its benchmark index over the period. While this stance supported returns in those weeks when rates rose, it was not uniformly helpful across the period. There is no guarantee the security sectors mentioned will continue to perform well or be held by the fund in the future. 3
RATING ALLOCATIONS AS OF 3/31/05 AAA/Aaa 10.8% AA/Aa 4.9 A/A 5.9 BBB/Baa 13.5 BB/Ba 3.2 B/B 5.1 Non-Rated 56.6 TOP 5 SECTORS AS OF 3/31/05 Health Care 20.2% Continuing Care 18.1 Industrial Revenue 16.4 Tax District 14.7 General Purpose 5.5 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05 Florida 10.6% Texas 7.2 California 7.1 Illinois 6.9 Pennsylvania 6.3 New York 6.2 New Jersey 5.7 Missouri 4.8 Ohio 3.5 Massachusetts 3.1 Arizona 3.1 Minnesota 3.0 Colorado 2.8 Oklahoma 2.3 Georgia 2.2 Michigan 2.1 Maryland 1.9 Washington 1.7 Wisconsin 1.4 Tennessee 1.4 North Carolina 1.3 South Carolina 1.1 Oregon 1.1 Alabama 1.0 New Hampshire 1.0 Virginia 1.0 Puerto Rico 1.0 Indiana 1.0 Iowa 0.9 Nevada 0.9 South Dakota 0.9 Louisiana 0.8 Kansas 0.7 Hawaii 0.6
(continued on next page)
4
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05 (continued from previous page) New Mexico 0.6 Connecticut 0.6 District of Columbia 0.5 Rhode Island 0.5 Alaska 0.4 Maine 0.4 U. S. Virgin Islands 0.3 Utah 0.3 North Dakota 0.2 Vermont 0.2 Wyoming 0.1 Idaho 0.1 Delaware 0.1 Mississippi 0.1 ----- Total Investments 101.0% Liabilities in Excess of Other Assets -1.0 ----- Total Net Assets 100.0%
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings allocations & sectors are as a percentage of long-term investments. Summary of investments by state classification is as a percentage of total net assets. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 5 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. 6 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities and information on how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by visiting our website at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 7 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales charge on redemptions of Class B and Class C Shares; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/1/04 - 3/31/05. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your cost would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* -------------------------------------------------- 10/1/04 3/31/05 10/1/04-3/31/05 Class A Actual.................................... $1,000.00 $1,039.78 $4.27 Hypothetical.............................. 1,000.00 1,020.73 4.23 (5% annual return before expenses) Class B Actual.................................... 1,000.00 1,035.94 8.07 Hypothetical.............................. 1,000.00 1,017.03 8.00 (5% annual return before expenses) Class C Actual.................................... 1,000.00 1,035.64 8.07 Hypothetical.............................. 1,000.00 1,017.03 8.00 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, 1.60%, and 1.59% for Class A, B, and C Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 8 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MUNICIPAL BONDS 100.4% ALABAMA 1.0% $1,000 Alabama Drinking Wtr Fin Auth Revolving Fd Ln Ser C (AMBAC Insd)...................... 5.750% 08/15/18 $ 1,104,770 2,000 Alabama Drinking Wtr Fin Auth Revolving Fd Ln Ser C (AMBAC Insd)...................... 5.375 08/15/23 2,144,720 2,000 Alabama Wtr Pollutn Ctl Auth (AMBAC Insd)...................................... 5.750 08/15/18 2,198,480 1,000 Butler, AL Indl Dev Brd Solid GA Pacific Corp Proj Rfdg (AMT)....................... 5.750 09/01/28 1,007,680 1,500 Colbert Cnty Northwest Auth Hlthcare Fac... 5.750 06/01/27 1,511,235 2,500 Huntsville/Carlton Cove, AL Carlton Cove Inc Proj Ser A............................. 7.000 11/15/17 1,494,725 3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev Mobile Energy Svc Co Proj Rfdg......... 6.950 01/01/20 59 1,395 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem Hosp Ser A............................. 5.600 11/01/16 1,394,456 1,750 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem Hosp Ser A............................. 5.650 11/01/22 1,738,537 -------------- 12,594,662 -------------- ALASKA 0.4% 1,520 Alaska Indl Dev & Expt Auth Williams Lynxs AK Cargoport (AMT) (Acquired 05/17/01, Cost $1,520,000) (a)............................ 7.800 05/01/14 1,588,643 4,000 Juneau, AK City & Borough Rev Saint Anns Care Ctr Proj.............................. 6.875 12/01/25 3,611,280 -------------- 5,199,923 -------------- ARIZONA 3.1% 2,000 Arizona Hlth Fac Auth Hosp John C Lincoln Hlth Network............................... 6.375 12/01/37 2,158,380 1,000 Arizona Hlth Fac Auth Rev Terraces Proj Ser A.......................................... 7.500 11/15/23 1,011,830 1,250 Arizona Hlth Fac Auth Rev Terraces Proj Ser A.......................................... 7.750 11/15/33 1,268,975 5,880 Cochise Cnty, AZ Indl Dev Sierra Vista Cmnty Hosp Ser A Rfdg...................... 6.750 12/01/26 5,986,193 1,000 Flagstaff, AZ Indl Dev Auth Rev Sr Living Cmnty Northn AZ Proj....................... 7.500 03/01/35 1,062,410 500 Flagstaff, AZ Indl Dev Auth Rev Sr Living Cmnty Northn AZ Proj....................... 6.300 09/01/38 475,515 4,000 Maricopa Cnty, AZ Hlth Fac Rev Catholic Hlthcare West Ser A........................ 5.500 07/01/26 4,182,520 4,000 Maricopa Cnty, AZ Indl Dev Auth Multi-Family Hsg Rev Natl Hlth Fac II Proj Ser B (Acquired 01/15/98, Cost $4,000,000) (a)........................................ 6.625 07/01/33 2,855,760 2,460 Maricopa Cnty, AZ Indl Dev Christian Care Mesa Inc Proj Ser A........................ 7.750 04/01/15 2,555,891
See Notes to Financial Statements 9 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 2,055,960 1,500 Peoria, AZ Indl Dev Auth Rev Sierra Winds Life Ser A Rfdg............................ 6.375 08/15/29 1,504,905 2,500 Phoenix, AZ Indl Dev Auth Mtg Christian Care Apt Proj Ser A Rfdg................... 6.500 01/01/26 2,593,225 2,750 Pima Cnty, AZ Indl Dev Auth Ed Rev Horizon Cmnty Learning Ctr Rfdg.................... 5.250 06/01/35 2,750,192 1,865 Pima Cnty, AZ Indl Dev Auth Fac Ed Rev Milestones Charter Sch Proj................ 6.750 11/01/33 1,870,054 800 Pima Cnty, AZ Indl Dev Auth Fac Skyline Tech High Sch Proj......................... 7.500 02/01/34 804,000 1,000 Pima Cnty, AZ Indl Dev Auth Rev La Posada at Park Ctr Ser A.......................... 7.000 05/15/27 1,013,270 1,040 Red Hawk Canyon Cmnty Fac Dist No 2 AZ Dist Assmt Rev.................................. 6.500 12/01/12 1,121,432 2,150 Tucson, AZ Multi-Family Rev Hsg Catalina Asstd Living Ser A (AMT)................... 6.500 07/01/31 1,895,612 -------------- 37,166,124 -------------- CALIFORNIA 7.1% 1,000 Abag Fin Auth Nonprofit Corp CA American Baptist Homes Ser A Rfdg................... 5.850 10/01/27 948,100 1,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.600 09/01/25 985,010 2,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.650 09/01/30 1,990,540 2,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.700 09/01/35 1,984,180 1,000 Beaumont, CA Fin Auth Loc Agy Ser D........ 5.800 09/01/35 1,003,670 1,000 Blythe, CA Redev Agy Proj.................. 5.750 05/01/34 992,260 1,000 Brentwood, CA Infrastructure Auth Rev...... 5.875 09/02/34 1,018,270 4,500 California Hlth Fac Fin Auth Rev Adventist Hlth Sys Ser A............................. 5.000 03/01/33 4,489,740 3,000 California Pollutn Ctl Fin Auth Solid Waste Disp Rev Solid Waste Mgmt Inc Proj Ser A 2 (AMT) (b).................................. 5.400 04/01/25 3,047,280 1,675 California Statewide Cmnty Dev Auth Daughters of Charity Hlth A................ 5.250 07/01/35 1,705,435 1,250 California Statewide Cmnty Dev Auth Daughters of Charity Hlth Ser A............ 5.000 07/01/39 1,238,562 1,000 California Statewide Cmnty Dev Auth Elder Care Alliance Ser A........................ 8.250 11/15/32 1,028,560 960 California Statewide Cmnty Dev Auth Multi- Family Rev Hsg Heritage Pointe Sr Apt Ser QQ (AMT) (Acquired 02/19/02, Cost $952,613) (a)........................................ 7.500 10/01/26 927,782 1,000 California Statewide Cmnty Dev Auth San Francisco Art Institute (Acquired 07/05/02, Cost $1,000,000) (a)....................... 7.375 04/01/32 1,000,970 1,000 Chino, CA Cmnty Fac Dist No 03 Impt Area 1.......................................... 5.700 09/01/29 1,001,750
10 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd)..... * 09/01/17 $ 2,330,300 1,500 Corona-Norco, CA Univ Sch Dist Pub Fin Auth Spl Tax Rev Ser A.......................... 5.800% 09/01/35 1,510,185 2,300 Foothill/Eastern Tran Corridor Agy CA Toll Rd Rev (MBIA Insd)......................... * 01/15/18 1,179,371 10,000 Golden St Tob Securitization Corp CA Tob Settlement Enhanced Asset Bkd B (FSA Insd)...................................... 5.000 06/01/43 10,109,600 1,750 Huntington Beach, CA Cmnty No 2003 1 Huntington Ctr............................. 5.800 09/01/23 1,777,160 905 Indio, CA Pub Fin Auth Rev Tax Increment (Prerefunded @ 08/15/06)................... 6.500 08/15/27 953,336 2,000 Indio, CA Redev Agy Tax Alloc Sub Merged Proj Area Ser B............................ 6.375 08/15/33 2,065,300 500 Indio, CA Redev Agy Tax Alloc Sub Merged Proj Area Ser B............................ 6.500 08/15/34 521,135 1,000 Jurupa, CA Cmnty Svc Dist Spl Cmnty Fac Dist No 4 Ser A............................ 5.700 09/01/34 1,010,470 1,865 Lake Elsinore, CA Pub Fin Auth Loc Agy Rev Ser F...................................... 7.100 09/01/20 2,025,446 1,000 Lee Lake Wtr Dist CA Cmnty Fac Dist No 1 Spl Tax Sycamore Creek..................... 6.000 09/01/33 1,055,020 1,000 Lincoln, CA Spl Tax Cmnty Fac Dist No 2003 Ser 1...................................... 6.000 09/01/34 1,026,820 1,750 Los Angeles, CA Regl Arpt Impt Corp Lease Rev Fac Sublease LA Intl Ser A-1 Rfdg...... 7.125 12/01/24 1,759,450 8,440 Los Angeles, CA Regl Arpt Impt Corp Lease Rev Ser C (AMT)............................ 7.500 12/01/24 8,598,841 1,440 Millbrae, CA Residential Fac Rev Magnolia of Millbrae Proj Ser A (AMT)............... 7.375 09/01/27 1,467,374 1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks Impt Area A................................ 5.900 09/01/27 1,040,590 1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks Impt Area A................................ 6.000 09/01/34 1,043,410 1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks Impt Area B................................ 6.000 09/01/27 1,051,700 2,000 Orange Cnty, CA Cmnty Fac Tax No 04-1 Ladera Ranch Ser A......................... 5.150 08/15/29 2,000,020 1,000 Palmdale, CA Spl Tax Cmnty Fac 03-1 Anaverde A................................. 5.350 09/01/30 995,140 1,100 Palmdale, CA Spl Tax Cmnty Fac 03-1 Anaverde A................................. 5.400 09/01/35 1,091,013 1,000 Perris, CA Cmnty Fac Dist Spl Tax No 01-2 Ser A...................................... 6.375 09/01/32 1,026,250 2,000 Riverside, CA Univ Sch Dist Tax Cmnty Fac Dist 15 Impt Area 1........................ 5.550 09/01/30 2,009,360
See Notes to Financial Statements 11 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $2,000 San Marcos, CA Pub Fac Auth Spl Tax Rev Ser A.......................................... 5.650% 09/01/36 $ 2,005,300 1,135 Simi Vly, CA Cmnty Dev Agy Coml Sycamore Plaza II Rfdg (Acquired 07/28/98, $1,135,000) (a)............................ 6.000 09/01/12 1,178,016 1,000 Upland, CA Cmnty Fac Dist 2003 San Antonio Impt 1 A................................... 5.900 09/01/24 1,047,520 1,500 Upland, CA Cmnty Fac Dist 2003 San Antonio Impt 1 A................................... 6.000 09/01/34 1,559,640 1,965 Vallejo, CA Ctf Partn Touro Univ........... 7.250 06/01/16 2,107,423 970 Vallejo, CA Pub Fin Auth Loc Hiddenbrooke Impt Dist Ser A............................ 5.800 09/01/31 988,624 1,000 Woodland, CA Spl Tax Cmnty Fac Dist 1 Spring Lake................................ 6.250 09/01/34 1,001,960 1,800 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/31 1,852,704 3,000 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/39 3,063,630 -------------- 85,814,217 -------------- COLORADO 2.8% 1,000 Bromley Pk Met Dist CO No 2 Ser B.......... 8.050 12/01/32 1,015,180 975 Colorado Ed & Cultural Fac Charter Sch Frontier Academy........................... 7.250 06/01/20 1,007,058 2,000 Colorado Hlth Fac Auth Rev Baptist Home Assn Ser A................................. 6.375 08/15/24 1,728,060 2,000 Colorado Hlth Fac Auth Rev Baptist Home Assn Ser B................................. 7.500 08/15/27 1,992,260 1,060 Colorado Hlth Fac Auth Rev Christian Living Campus Proj................................ 7.050 01/01/19 1,097,418 5,560 Colorado Hlth Fac Auth Rev Hosp Poudre Vly Hlthcare F................................. 5.000 03/01/25 5,533,368 3,425 Denver, CO Hlth & Hosp Auth Ser A Rfdg..... 6.250 12/01/33 3,661,667 2,500 Elk Vly, CO Pub Impt Fee Ser A............. 7.300 09/01/22 2,684,475 5,000 Jefferson Cnty, CO Sch Dist No R-001 Drivers Ser 674 (Inverse Fltg) (Acquired 12/22/04, Cost $5,654,960) (FSA Insd) (a) (c) (d).................................... 7.840 12/15/12 5,489,550 710 Lafayette, CO Indl Dev Rev Rocky Mtn Instr Proj Ser A (e)............................. 6.750 10/01/14 398,395 1,985 Lafayette, CO Indl Dev Rev Rocky Mtn Instr Proj Ser A (AMT) (e)....................... 7.000 10/01/18 1,114,240 4,825 Lake Creek Affordable Hsg Corp Hsg Proj Ser A Rfdg..................................... 6.250 12/01/23 4,420,134 500 Neu Towne, CO Met Dist..................... 7.250 12/01/34 496,010 1,000 Serenity Ridge, CO Met Dist No 2........... 7.500 12/01/34 995,720 1,725 Skyland Metro Dist CO Gunnison Cnty Rfdg... 6.750 12/01/22 1,713,373 1,000 Southlands Met Dist No 1 CO................ 7.000 12/01/24 1,093,550 -------------- 34,440,458 --------------
12 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- CONNECTICUT 0.6% $1,500 Connecticut St Dev Auth Indl Afco Cargo Bdl LLC Proj (AMT)............................. 8.000% 04/01/30 $ 1,583,505 2,000 Mohegan Tribe Indians CT Pub Impt Priority Dist (Acquired 09/27/01, Cost $1,957,202) (a)........................................ 6.250 01/01/31 2,127,020 3,500 Mohegan Tribe Indians CT Pub Impt Priority Dist (Acquired 11/03/04, Cost $3,419,074) (a)........................................ 5.250 01/01/33 3,509,695 -------------- 7,220,220 -------------- DELAWARE 0.1% 1,100 Wilmington, DE Multi-Family Rent Rev Hsg Electra Arms Sr Assoc Proj (AMT)........... 6.250 06/01/28 940,753 -------------- DISTRICT OF COLUMBIA 0.5% 1,000 District of Columbia Rev Methodist Home Issue...................................... 6.000 01/01/29 926,730 85 District of Columbia Ser A-1 (Escrowed to Maturity) (MBIA Insd)...................... 6.500 06/01/10 97,549 5,000 Metropolitan WA DC Arpt Auth Sys Ser A (AMT) (MBIA Insd).......................... 5.000 10/01/35 5,024,200 -------------- 6,048,479 -------------- FLORIDA 10.3% 1,000 Anthem Pk Cmnty Dev Dist FL Cap Impt Rev... 5.800 05/01/36 1,000,500 1,000 Bellalago Ed Fac Benefits Ser A............ 6.000 05/01/33 1,027,050 1,000 Bellalago Ed Fac Benefits Ser B............ 5.800 05/01/34 1,012,470 4,315 Bloomingdale, FL Cmnty Dev Dist Spl Assmt Rev........................................ 5.875 05/01/36 4,402,853 1,000 Bluewaters Cmnty Dev Dist of FL............ 6.000 05/01/35 1,005,570 2,500 Bonnet Creek Resort Cmnty Dev.............. 7.500 05/01/34 2,677,100 795 Caribe Palm Cmnty Dev Dist FL Spl Assmt Ser A.......................................... 5.850 05/01/35 809,556 3,280 Escambia Cnty, FL Rev ICF/MR Pensacola Care Dev Ctr.................................... 10.250 07/01/11 3,304,338 1,390 Escambia Cnty, FL Rev ICF/MR Pensacola Care Dev Ctr Ser A.............................. 10.250 07/01/11 1,400,314 1,390 Fishhawk Cmnty Dev Dist of FL Spl Assmt Rev (Prerefunded @ 05/01/06)................... 7.625 05/01/18 1,480,489 3,675 Florida Hsg Fin Corp Rev Hsg Beacon Hill Apt Ser C (AMT)............................ 6.610 07/01/38 3,425,945 7,150 Florida Hsg Fin Corp Rev Hsg Cypress Trace Apt Ser G (AMT)............................ 6.600 07/01/38 6,764,257 4,850 Florida Hsg Fin Corp Rev Hsg Westchase Apt Ser B (AMT)................................ 6.610 07/01/38 4,214,698 3,505 Hammock Bay Cmnty Dev Dist FL Spl Assmt Rev Ser A...................................... 6.125 05/01/35 3,521,579 1,500 Harbour Isles Cmnty Dev Dist of FL......... 6.125 05/01/35 1,519,605 310 Heritage Harbor Cmnty Dev Dist FL Rev Recntl..................................... 7.750 05/01/23 287,209
See Notes to Financial Statements 13 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 850 Heritage Harbor Cmnty Dev Dist FL Rev Spl Assmt Ser A................................ 6.700% 05/01/19 $ 871,377 1,435 Highlands Cnty, FL Hlth Fac Hosp Adventist Hlth Sys................................... 5.250 11/15/28 1,464,704 1,500 Hillsborough Cnty, FL Hsg Fin Hsg Clipper Cove Apt Proj Ser A (AMT).................. 7.375 07/01/40 1,474,470 2,500 Hillsborough Cnty, FL Indl Dev Auth Hosp Rev Tampa Gen Hosp Proj Ser B.............. 5.250 10/01/34 2,544,750 1,000 Islands at Doral III Cmnty 2004 Ser A...... 5.900 05/01/35 1,009,850 1,000 Islands at Doral NE Cmnty Dev.............. 6.250 05/01/34 1,038,190 6,410 Jea, FL Wtr & Swr Sys Rev Drivers Ser 805 (Acquired 03/22/05, Cost $6,268,702) (MBIA Insd) (a).................................. 4.750 10/01/12 6,305,645 1,480 Kendall Breeze West Cmnty Dev Dist FL Spl Assmt...................................... 5.875 05/01/34 1,471,742 2,000 Keys Cove Cmnty Dev Dist FL Assmt Rev...... 5.875 05/01/35 1,996,240 780 Lake Saint Charles, FL Cmnty Dev Dist Spl Assmt Rev.................................. 7.875 05/01/17 798,767 2,000 Lee Cnty, FL Indl Dev Auth Hlthcare Fac Rev Cypress Cove Hlthpk Ser A.................. 6.750 10/01/32 2,037,740 3,535 Leon Cnty, FL Ed Fac Auth Rev Southgate Residence Hall Ser A Rfdg.................. 6.750 09/01/28 3,546,418 1,290 Lexington Cmnty Dev Dist FL................ 6.125 05/01/34 1,312,240 105 Marshall Creek Cmnty Dev FL Spl Assmt Ser B.......................................... 6.750 05/01/07 105,607 2,500 Meadow Woods Cmnty Dev Dist FL Ser A....... 6.050 05/01/35 2,523,325 1,000 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med Ctr FL Proj................................ 5.375 11/15/28 910,750 2,500 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med Ctr Rfdg (Acquired 04/26/04, Cost $2,412,826) (a)............................ 6.750 11/15/29 2,683,150 3,000 Midtown Miami, FL Cmnty Dev Dist Ser A..... 6.000 05/01/24 3,091,890 1,195 Miromar Lakes Cmnty Dev Dist Ser B......... 7.250 05/01/12 1,257,236 930 Northern Palm Beach Cnty Dist FL Impt Wtr Ctl & Impt Unit Dev No 16 Rfdg............. 7.500 08/01/24 989,669 1,775 Oak Creek Cmnty Dev Dist FL Spl Assmt...... 5.800 05/01/35 1,756,203 2,050 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg.................. 8.625 07/01/20 2,231,199 2,250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg.................. 8.750 07/01/26 2,448,877 1,560 Orange Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys (d)..................... 5.875 11/15/11 1,717,544 1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys......................... 6.375 11/15/20 1,099,740 2,000 Orange Cnty, FL Hlth Fac Auth Rev Westminster Cmnty Care..................... 6.600 04/01/24 1,753,500
14 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $1,000 Overoaks, FL Cmnty Dev Dist CA Ser A....... 6.125% 05/01/35 $ 1,004,410 1,000 Parklands Lee Cmnty Dev Dist FL Spl Assmt Ser A...................................... 5.800 05/01/35 991,640 1,000 Pine Is Cmnty Dev Dist FL Spl Assmt........ 5.750 05/01/35 1,005,400 2,280 Pinellas Cnty, FL Ed Fac Auth Rev College Harbor Proj Ser A.......................... 8.250 12/01/21 2,366,024 1,685 Pinellas Cnty, FL Ed Fac Auth Rev College Harbor Proj Ser A.......................... 8.500 12/01/28 1,749,755 3,000 Pinellas Cnty, FL Hlth Fac Auth Oaks of Clearwater Proj............................ 6.250 06/01/34 3,085,500 1,000 Reunion East Cmnty Dev Dist................ 5.800 05/01/36 1,009,430 2,000 Reunion West Cmnty Dev Dist................ 6.250 05/01/36 2,060,560 980 Saddlebrook, FL Cmnty Ser A................ 6.900 05/01/33 1,027,638 500 Saint John's Cnty, FL Indl Dev Auth Hlthcare Glenmoor Saint John's Proj Ser A.......................................... 8.000 01/01/17 529,120 1,400 Saint John's Cnty, FL Indl Dev Auth Hlthcare Glenmoor Saint John's Proj Ser A.......................................... 8.000 01/01/30 1,481,536 2,000 Saint John's Cnty, FL Indl Dev Auth Hlthcare Rev Bayview Proj Ser A............ 7.100 10/01/26 2,003,300 6,000 Sarasota Cnty, FL Hlth Fac Auth Hlth Fac Sunnyside Ppty............................. 6.700 07/01/25 5,508,420 1,995 Silver Palms Cmnty Dev Dist................ 5.900 05/01/34 1,974,352 1,300 South Dade Venture Cmnty Dev............... 6.125 05/01/34 1,327,365 1,500 South Vlg Cmnty Dev Dist FL Cap Impt Rev Ser A...................................... 5.700 05/01/35 1,508,115 175 Stoneybrook West Cmnty Dev Dist FL Spl Assmt Rev Ser B............................ 6.450 05/01/10 177,989 22 Tara Cmnty Dev Dist 1 FL Cap Impt Rev Ser B.......................................... 6.750 05/01/10 22,390 1,500 Town Ctr Palm Coast Cmnty Dev Dist FL Cap Impt Rev................................... 6.000 05/01/36 1,509,510 1,500 Turnbull Creek Cmnty Dev Dist FL Spl Assmt...................................... 5.800 05/01/35 1,504,635 1,787 University Square Cmnty Dev Dist FL Cap Impt Rev (Acquired 10/07/99, Cost $1,720,270) (a)............................ 6.750 05/01/20 1,877,994 2,000 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj Rfdg (Prerefunded @ 11/01/06)......... 7.625 11/01/26 2,187,180 1,000 World Commerce Cmnty Dev Dist Ser A1....... 6.250 05/01/22 1,006,250 1,715 World Commerce Cmnty Dev Dist Ser A2....... 6.125 05/01/35 1,739,353 -------------- 124,952,222 -------------- GEORGIA 2.2% 2,000 Atlanta, GA Tax Alloc Atlantic Sta Proj.... 7.750 12/01/14 2,184,240 2,365 Atlanta, GA Urban Residential Fin Auth Multi-Family Rev John Eagan Proj Ser A (AMT)...................................... 6.750 07/01/30 2,186,277 4,335 Atlanta, GA Wtr & Wastwtr Rev (FSA Insd)... 5.000 11/01/37 4,442,638 2,750 De Kalb Cnty, GA Residential Care Fac Kings Bridge Ser A............................... 8.250 07/01/26 2,847,130
See Notes to Financial Statements 15 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- GEORGIA (CONTINUED) $1,000 Effingham Cnty, GA Dev Auth Solfort James Proj (AMT)................................. 5.625% 07/01/18 $ 1,017,750 1,800 Fulton Cnty, GA Residential Care Canterbury Court Proj Ser A........................... 6.000 02/15/22 1,809,774 650 Fulton Cnty, GA Residential Care Canterbury Court Proj Ser A........................... 6.125 02/15/34 640,763 3,500 Fulton Cnty, GA Residential Care Sr Lien RHA Asstd Living Ser A..................... 7.000 07/01/29 3,333,680 4,000 Milledgeville Baldwin Cnty GA College & St Univ Fndtn................................. 5.625 09/01/30 4,141,320 1,000 Private Colleges & Univ Auth GA Mercer Hsg Corp Proj Ser A............................ 6.000 06/01/21 1,048,180 2,930 Renaissance on Peachtree Unit Invt Tr Ctf GA Custody Ctf (Variable Rate Coupon)...... 12.334 10/01/25 2,692,816 -------------- 26,344,568 -------------- HAWAII 0.6% 3,000 Hawaii St Dept Budget & Fin Spl Purp Rev Kahala Nui Proj Ser A...................... 8.000 11/15/33 3,277,680 1,820 Hawaii St Dept Trans Spl Fac Rev Continental Airl Inc (AMT)................. 5.625 11/15/27 1,288,778 2,825 Kuakini, HI Hlth Sys Spl Ser A............. 6.375 07/01/32 2,923,084 -------------- 7,489,542 -------------- IDAHO 0.1% 1,000 Idaho Hlth Fac Auth Rev Vly Vista Care Ser A Rfdg..................................... 7.875 11/15/29 977,050 -------------- ILLINOIS 6.9% 2,500 Bolingbrook, IL Cap Apprec Ser B (MBIA Insd)...................................... * 01/01/29 682,150 1,993 Bolingbrook, IL Spl Svc Area No 01-1....... 7.375 07/01/31 2,145,664 1,500 Bolingbrook, IL Spl Svc Area No 1 Spl Tax Augusta Vlg Proj (Acquired 11/13/02, Cost $1,500,000) (a)............................ 6.750 03/01/32 1,552,650 1,665 Bolingbrook, IL Spl Svc Area No 1 Spl Tax Ser 2004 Augusta Vlg Proj.................. 6.250 03/01/32 1,666,948 1,901 Bolingbrook, IL Spl Svc Area No 3 Lakewood Ridge Proj................................. 7.050 03/01/31 2,009,262 964 Cary, IL Spl Tax Svc Area No 1 Cambridge Ser A...................................... 7.625 03/01/30 1,040,773 7,750 Chicago, IL O'Hare Intl Arpt Rev RR II R 239-1 (AMT) (Inverse Fltg) (Acquired 08/18/03, Cost $8,374,505) (FSA Insd) (a) (c) (d).................................... 9.070 01/01/19 9,225,445 3,600 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airl Inc Proj Ser B Rfdg (AMT) (f) (g)........................................ 6.100 11/01/35 612,000 5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.500 01/01/38 5,388,750 4,000 Chicago, IL Spl Assmt Lakeshore East Proj....................................... 6.625 12/01/22 4,136,480
16 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 840 Chicago, IL Tax Increment Alloc Read Dunning Ser B (ACA Insd)................... 7.250% 01/01/14 $ 893,332 2,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A........................... 6.500 12/01/05 2,048,740 3,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A (ACA Insd)................ 6.500 12/01/06 3,155,610 1,925 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A (ACA Insd)................ 6.500 12/01/08 2,104,853 1,000 Clay Cnty, IL Hosp Rev..................... 5.900 12/01/28 930,970 1,228 Gilberts, IL Spl Svc Area No 9 Spl Tax Big Timber Proj (d)............................ 7.375 03/01/11 1,386,093 1,245 Gilberts, IL Spl Svc Area No 9 Spl Tax Big Timber Proj................................ 7.750 03/01/27 1,386,444 1,500 Godfrey, IL Rev Utd Methodist Vlg Ser A.... 5.875 11/15/29 1,311,465 2,700 Hoopeston, IL Hosp Cap Impt Rev Hoopeston Cmnty Mem Hosp Rfdg........................ 6.550 11/15/29 2,501,604 1,740 Huntley, IL Increment Alloc Rev Huntley Redev Proj Ser A........................... 8.500 12/01/15 1,804,832 225 Huntley, IL Spl Svc Area No 10 Spl Tax Ser A (d)...................................... 6.250 03/01/09 227,313 2,621 Huntley, IL Spl Svc Area No 10 Spl Tax Ser A.......................................... 6.500 03/01/29 2,668,335 1,405 Illinois Fin Auth Rev Cmnty Fac Clinic Altgeld Proj............................... 8.000 11/15/16 1,264,711 500 Illinois Fin Auth Rev Fairview Oblig Grp Ser A Rfdg................................. 6.000 08/15/20 501,670 500 Illinois Fin Auth Rev Fairview Oblig Grp Ser A Rfdg................................. 6.125 08/15/27 494,260 3,000 Illinois Fin Auth Rev Northwestern Mem Hosp Ser A...................................... 5.500 08/15/43 3,169,110 1,000 Illinois Hlth Fac Auth Rev Ctr Baptist Home Proj....................................... 7.125 11/15/29 976,670 2,500 Illinois Hlth Fac Auth Rev Decatur Mem Hosp....................................... 5.750 10/01/24 2,592,725 3,000 Illinois Hlth Fac Auth Rev Fairview Oblig Grp Ser A Rfdg (Prerefunded @ 08/15/06).... 7.400 08/15/23 3,231,030 650 Illinois Hlth Fac Auth Rev Loyola Univ Hlth Sys Ser A.................................. 6.000 07/01/21 674,752 1,200 Illinois Hlth Fac Auth Rev Lutheran Sr Ministries Oblig Ser A..................... 7.375 08/15/31 1,273,440 1,500 Illinois Hlth Fac Auth Rev Peace Mem Ministries Proj (Prerefunded @ 08/15/06)... 7.500 08/15/26 1,617,420 1,365 Illinois Hlth Fac Auth Rev Proctor Cmnty Hosp Proj.................................. 7.500 01/01/11 1,365,846 250 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.200 08/15/23 252,812 1,125 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.400 08/15/33 1,138,691
See Notes to Financial Statements 17 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 700 Illinois Hlth Fac Auth Rev Silver Cross Hosp & Med Rfdg............................ 5.500% 08/15/19 $ 715,218 2,375 Lake Cnty, IL Fst Presv Dist Ld Acquisition & Dev...................................... 5.750 12/15/16 2,652,329 675 Lake Cnty, IL Fst Presv Dist Ld Acquisition & Dev...................................... 5.750 12/15/17 753,820 80 Lake, Cook, Kane & McHenry Cntys, IL Cmnty Unit Sch Dist No 22 (FGIC Insd)............ 5.750 12/01/19 88,202 1,000 Minooka, IL Spl Assmt Impt Lakewood Trls Unit 2 Proj................................ 6.375 03/01/34 1,002,270 1,207 Montgomery, IL Spl Assmt Impt Lakewood Creek Proj................................. 7.750 03/01/30 1,335,533 1,800 Peoria, IL Spl Tax Weaverridge Spl Svc Area....................................... 8.050 02/01/17 1,893,312 2,000 Plano, IL Spl Svc Area No 1 Lakewood Springs Proj Ser A......................... 6.200 03/01/34 2,010,100 2,095 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000 06/01/17 2,831,560 950 Sterling, IL Rev Hoosier Care Proj Ser A... 7.125 06/01/34 873,525 2,000 Yorkville, IL Utd City Spl Svc Area Spl Tax No 4 104 Mpi Grade Resv Proj............... 6.375 03/01/34 1,996,180 -------------- 83,584,899 -------------- INDIANA 1.0% 825 Crawfordsville, IN Redev Cmnty Redev Dist Tax Increment Rev (Acquired 10/15/97, Cost $825,000) (a) (d).......................... 7.000 02/01/12 838,002 1,905 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj Ser A................................. 7.125 06/01/34 1,753,476 6,500 Indiana Hlth Fac Hosp Rev Cmnty Fndtn Northwest IN Ser A......................... 6.000 03/01/34 6,796,270 2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt (AMT)...................................... 6.375 11/01/29 2,132,560 -------------- 11,520,308 -------------- IOWA 0.9% 2,000 Estherville, IA Hosp Rev Avera Holy Family Proj....................................... 6.250 07/01/26 2,129,440 375 Evansdale, IA Hlthcare Western Home Proj... 6.000 11/01/26 367,822 3,400 Evansdale, IA Hlthcare Western Home Proj Ser A (d).................................. 6.000 11/01/26 3,334,924 1,975 Iowa Fin Auth Hlth Care Fac Care Initiatives Proj Rfdg...................... 9.250 07/01/25 2,377,228 500 Iowa Fin Auth Retirement Cmnty Friendship Haven Proj Ser A........................... 5.750 11/15/19 491,435 500 Iowa Fin Auth Retirement Cmnty Friendship Haven Proj Ser A........................... 6.000 11/15/24 495,355
18 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- IOWA (CONTINUED) $ 800 Iowa Fin Auth Retirement Cmnty Friendship Haven Proj Ser A........................... 6.125% 11/15/32 $ 773,896 1,000 Polk Cnty, IA Hlthcare Fac Rev Luther Pk Hlth Ctr Inc Proj.......................... 6.150 10/01/36 974,630 -------------- 10,944,730 -------------- KANSAS 0.7% 910 Lawrence, KS Coml Dev Rev Holiday Inn Sr Ser A Rfdg................................. 8.000 07/01/16 857,238 1,000 Lenexa, KS Hlthcare Fac Rev Lakeview Vlg Inc Ser B.................................. 6.250 05/15/26 1,014,780 915 Manhattan, KS Coml Dev Rev Holiday Inn Sr Ser A Rfdg................................. 8.000 07/01/16 861,948 2,000 Olathe, KS Sr Living Fac Rev Aberdeen Vlg Inc Ser A.................................. 8.000 05/15/30 2,416,960 1,500 Olathe, KS Sr Living Fac Rev Aberdeen Vlg Inc Ser A Rfdg (Prerefunded @ 05/15/10) (b)........................................ 5.600 05/15/28 1,479,615 1,500 Overland Pk, KS Dev Corp Rev First Tier Overland Park Ser A........................ 7.375 01/01/32 1,636,920 -------------- 8,267,461 -------------- LOUISIANA 0.8% 1,990 Louisiana Hsg Fin Agy Rev Azalea Estates Ser A Rfdg (AMT) (GNMA Collateralized)..... 5.375 10/20/39 2,022,676 2,135 Louisiana Hsg Fin Agy Rev Multi-Family Hsg Plantation Ser A........................... 7.125 01/01/28 1,486,024 1,600 Louisiana Loc Govt Environment Fac Hlthcare Saint James Place A Rfdg................... 7.000 11/01/29 1,444,704 1,000 Louisiana Pub Fac Auth Rev Progressive Hlthcare................................... 6.375 10/01/20 939,650 1,000 Louisiana Pub Fac Auth Rev Progressive Hlthcare................................... 6.375 10/01/28 894,740 3,208 Louisiana St Univ & Agric & Mechanical College Univ Rev Master Agreement (Acquired 11/30/98, Cost $3,208,383) (a)............. 5.750 10/30/18 3,033,333 -------------- 9,821,127 -------------- MAINE 0.4% 4,480 Jay, ME Solid Waste Disp Rev Intl Paper Co Proj Ser A Rfdg (AMT)...................... 4.900 11/01/17 4,497,158 -------------- MARYLAND 1.9% 2,000 Annapolis, MD Spl Oblig Park Pl Proj Ser A.......................................... 5.350 07/01/34 1,984,040 1,000 Baltimore Cnty, MD Mtg Rev Shelter Elder Care Ser A................................. 7.250 11/01/29 972,250 4,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty Dev Auth Ser A............................. 5.950 07/01/30 4,013,680
See Notes to Financial Statements 19 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MARYLAND (CONTINUED) $1,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty Dev Auth Ser B............................. 6.250% 07/01/30 $ 1,004,130 595 Maryland St Econ Dev Corp Air Cargo Rev Afco Cargo BWI II LLC Proj (AMT) (d)....... 6.250 07/01/07 593,786 1,200 Maryland St Econ Dev Corp MD Golf Course Sys........................................ 8.250 06/01/28 1,169,484 1,540 Maryland St Hlth & Higher Ed Calvert Hlth Sys........................................ 5.500 07/01/36 1,597,842 1,000 Maryland St Hlth & Higher Ed Medstar Hlth Rfdg....................................... 5.500 08/15/33 1,019,370 3,000 Montgomery Cnty, MD Econ Dev Editorial Proj In Ed Ser A (Acquired 09/28/98, Cost $3,002,660) (a)............................ 6.400 09/01/28 2,885,610 1,652 Prince Georges Cnty, MD Rev................ 8.000 04/01/16 1,620,182 3,000 Prince Georges Cnty, MD Spl Oblig Spl Assmt Woodview Ser A............................. 8.000 07/01/26 3,212,370 1,000 Westminster, MD Econ Dev Carroll Lutheran Vlg Ser A.................................. 6.000 05/01/24 1,022,550 1,500 Westminster, MD Econ Dev Carroll Lutheran Vlg Ser A.................................. 6.250 05/01/34 1,548,435 -------------- 22,643,729 -------------- MASSACHUSETTS 3.1% 1,000 Massachusetts St Dev Fin Agy Briarwood Ser B (Prerefunded @ 12/01/10)................. 8.000 12/01/22 1,223,640 250 Massachusetts St Dev Fin Agy Rev Evergreen Ctr Inc. .................................. 5.000 01/01/24 236,447 500 Massachusetts St Dev Fin Agy Rev Evergreen Ctr Inc. .................................. 5.500 01/01/35 483,620 880 Massachusetts St Dev Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 07/27/00, Cost $880,000) (a).............................. 7.750 06/01/18 944,478 1,930 Massachusetts St Dev Fin Agy Rev Hillcrest Ed Ctr Inc................................. 6.375 07/01/29 1,855,058 2,970 Massachusetts St Dev Fin Agy Rev Hlthcare Fac Alliance Ser A......................... 7.100 07/01/32 2,882,623 1,000 Massachusetts St Dev Fin Agy Rev MCHSP Human Svc Providers Ser A (Prerefunded @ 07/01/10) (k).............................. 8.000 07/01/20 1,208,700 3,710 Massachusetts St Dev Fin Agy Rev New England Ctr For Children................... 6.000 11/01/19 3,734,783 3,100 Massachusetts St Hlth & Ed Civic Investments Ser B.......................... 9.150 12/15/23 3,569,867 4,475 Massachusetts St Hlth & Ed Fac Auth Rev Caritas Christi Oblig Grp Ser A............ 5.625 07/01/20 4,532,593 1,000 Massachusetts St Hlth & Ed Nichols College Issue Ser C................................ 6.000 10/01/17 1,059,820
20 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $1,000 Massachusetts St Hlth & Ed Northern Berkshire Hlth Ser B....................... 6.250% 07/01/24 $ 998,990 1,895 Massachusetts St Indl Fin Agy Assisted Living Fac Rev Marina Bay LLC Proj (AMT)... 7.500 12/01/27 1,994,942 990 Massachusetts St Indl Fin Agy Assisted Living Fac Rev Newton Grp Pptys LLC Proj (AMT)...................................... 8.000 09/01/27 1,047,351 605 Massachusetts St Indl Fin Agy Rev First Mtg GF/Pilgrim Inc Proj........................ 6.500 10/01/15 578,447 2,000 Massachusetts St Indl Fin Agy Rev First Mtg GF/Pilgrim Inc Proj........................ 6.750 10/01/28 1,845,760 2,000 Massachusetts St Indl Fin Agy Rev First Mtg Reeds Landing Proj (h)..................... 7.100/7.350 10/01/28 1,960,420 2,900 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/98, Cost $2,900,000) (a)............................ 6.375 06/01/18 2,978,039 655 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/98, Cost $655,000) (a).............................. 6.200 06/01/08 674,650 4,000 Massachusetts St Indl Fin Agy Rev Swr Fac Res Ctl Composting (AMT) (Acquired 08/10/89, Cost $4,000,00) (a).............. 9.250 06/01/10 4,011,400 -------------- 37,821,628 -------------- MICHIGAN 2.1% 2,500 Chelsea, MI Econ Dev Corp Rev Utd Methodist Retirement Rfdg............................ 5.400 11/15/27 2,357,900 875 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $875,000) (a).............................. 6.850 05/01/21 895,020 1,000 Gaylord, MI Hosp Fin Auth Ltd Oblig Rev Otsego Mem Hosp Rfdg....................... 6.500 01/01/31 975,490 1,700 Hillsdale, MI Hosp Fin Hillsdale Cmnty Hlth Ctr........................................ 5.000 05/15/13 1,664,062 2,940 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser A (b)...................................... 6.000 07/01/35 3,121,898 4,000 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser A (b)...................................... 6.250 07/01/40 4,294,200 2,390 Meridian, MI Econ Dev Corp Ltd Oblig Rev First Mtg Burcham Hills Ser A Rfdg......... 7.500 07/01/13 2,438,374 3,430 Meridian, MI Econ Dev Corp Ltd Oblig Rev First Mtg Burcham Hills Ser A Rfdg......... 7.750 07/01/19 3,509,061 3,045 Michigan St Hosp Fin Auth Rev Hosp Pontiac Osteopathic Ser A Rfdg..................... 6.000 02/01/14 3,045,670
See Notes to Financial Statements 21 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MICHIGAN (CONTINUED) $1,500 Michigan St Hosp Fin Auth Rev Hosp Pontiac Osteopathic Ser A Rfdg..................... 6.000% 02/01/24 $ 1,445,355 11,084 Michigan St Strategic Fd Ltd Oblig Rev Great Lakes Pulp & Fiber Proj (AMT) (f) (i)........................................ 8.000 12/01/27 1,633,160 -------------- 25,380,190 -------------- MINNESOTA 3.0% 2,000 Aitkin, MN Hlth Fac Rev Riverwood Hlthcare Ctr Proj................................... 7.750 02/01/31 2,064,780 1,000 Cambridge, MN Hsg & Hlthcare Fac Rev Grandview West Proj Ser B.................. 6.000 10/01/33 903,320 2,000 Carlton, MN Hlth & Hsg Fac Intermediate Faith Social Svc Inc Proj.................. 7.500 04/01/19 2,128,080 2,000 Carlton, MN Hlth & Hsg Fac Intermediate Faith Social Svc Inc Proj.................. 7.750 04/01/29 2,131,600 1,500 Duluth, MN Econ Dev Auth Saint Lukes Hosp....................................... 7.250 06/15/32 1,569,495 1,000 Duluth, MN Econ Dev Hlth Care Saint Lukes Hosp....................................... 6.000 06/15/12 1,004,530 2,000 Glencoe, MN Hlthcare Fac Rev............... 7.500 04/01/31 2,138,780 1,500 Minneapolis & Saint Paul, MN Met Northwest Airl Proj (AMT)............................ 7.375 04/01/25 1,427,970 6,890 Minneapolis & Saint Paul, MN Met Northwest Airl Proj Ser A (AMT)...................... 7.000 04/01/25 6,300,698 1,000 Minneapolis & Saint Paul, MN Met Northwest Airl Proj Ser B (AMT) (Prefunded @ 04/01/05).................................. 6.500 04/01/25 1,000,000 900 Minnesota Agric & Econ Dev Brd Rev Hlthcare Benedictine Proj Ser A..................... 5.500 08/01/23 881,514 875 Minnesota Agric & Econ Dev Brd Rev Hlthcare Benedictine Proj Ser A..................... 5.750 02/01/30 850,596 1,500 Oakdale, MN Rev Sr Hsg Oak Meadows Proj Rfdg....................................... 6.250 04/01/34 1,537,620 1,425 Ramsey, MN Lease Rev Pact Charter Sch Proj Ser A...................................... 6.750 12/01/33 1,438,723 1,500 Saint Cloud, MN Hsg & Redev Auth Sterling Heights Apt Proj (AMT)..................... 7.550 04/01/39 1,454,625 1,000 Saint Paul, MN Hsg & Redev Auth Higher Ground Academy Ser A Rfdg.................. 6.625 12/01/23 1,014,460 1,170 Saint Paul, MN Hsg & Redev Auth Hosp Rev Hltheast Proj Ser A Rfdg................... 6.625 11/01/17 1,176,634 1,000 Saint Paul, MN Hsg & Redev Cmnty of Peace Academy Proj Ser A......................... 7.875 12/01/30 1,050,790 2,250 Saint Paul, MN Port Auth Hotel Fac Rev Radisson Kellogg Proj Ser 2 Rfdg........... 7.375 08/01/29 2,350,012 1,000 Shakopee, MN Hlthcare Saint Francis Regl Med Ctr.................................... 5.250 09/01/34 1,010,320 1,000 Vadnais Heights, MN Lease Rev Agric & Food Sciences Ser A............................. 6.375 12/01/24 988,850
22 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MINNESOTA (CONTINUED) $1,000 Vadnais Heights, MN Lease Rev Agric & Food Sciences Ser A............................. 6.600% 12/01/34 $ 983,900 1,450 Winona, MN Hlthcare Winona Hlth Ser A...... 6.000 07/01/34 1,492,441 -------------- 36,899,738 -------------- MISSISSIPPI 0.1% 615 Mississippi Bus Fin Corp (AMT)............. 7.250 07/01/34 624,127 -------------- MISSOURI 4.8% 1,250 Cole Cnty, MO Indl Dev Auth Sr Living Fac Rev Lutheran Svcs Heisinger Proj........... 5.500 02/01/35 1,284,213 1,000 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg........................... 6.125 10/01/21 1,024,730 1,000 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg........................... 7.000 10/01/21 1,076,450 225 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj (Escrowed to Maturity).... 7.250 04/01/07 233,172 3,095 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj (Prerefunded @ 04/01/07).................................. 7.625 04/01/17 3,411,588 209 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj (Prerefunded @ 04/01/07).................................. 7.625 04/01/18 230,379 1,440 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj Rfdg...................... 5.000 04/01/17 1,406,376 1,500 Folk Ave South Transn Dist MO Transn Sales Tax Rev Dev MO............................. 5.625 11/01/31 1,477,140 3,000 Joplin, MO Indl Dev Auth Hlth Fac Rev Freeman Hlth Sys Proj...................... 5.500 02/15/29 3,026,880 2,000 Kansas City, MO Indl Dev Auth First Mtg Bishop Spencer Ser A....................... 6.250 01/01/24 2,027,440 1,500 Kansas City, MO Indl Dev Auth First Mtg Bishop Spencer Ser A....................... 6.500 01/01/35 1,522,185 984 Kansas City, MO Indl Dev Auth Multi-Family Hsg Rev Brentwood Manor Apt Proj Ser B (AMT)...................................... 7.250 10/15/38 958,042 3,000 Kansas City, MO Indl Dev Plaza Lib Proj.... 5.900 03/01/24 2,974,860 1,831 Kansas City, MO Multi-Family Hsg Rev Northwoods Apts Proj Ser A (AMT)........... 6.450 05/01/40 1,804,597 945 Kansas City, MO Multi-Family Hsg Rev Vlg Green Apt Proj (AMT)....................... 6.250 04/01/30 628,453 3,785 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev BJC Hlth Sys Ser A (b)..................... 5.000 05/15/18 3,968,724 2,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev BJC Hlth Sys Ser A (b)..................... 5.000 05/15/19 2,087,100 2,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev BJC Hlth Sys Ser A (b)..................... 5.000 05/15/20 2,080,480 2,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev BJC Hlth Sys Ser A (b)..................... 5.000 05/15/21 2,075,540
See Notes to Financial Statements 23 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MISSOURI (CONTINUED) $3,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev BJC Hlth Sys Ser A (b)..................... 5.000% 05/15/22 $ 3,103,470 10,820 Missouri St Hlth & Edl Fac Rev Drivers Ser 362 (Inverse Fltg) (Acquired 07/21/03, Cost $11,969,879) (a) (c) (d)................... 8.570 05/15/11 12,071,658 2,220 Nevada, MO Hosp Rev Neveda Regional Med Ctr........................................ 6.750 10/01/22 2,288,998 500 Saint Joseph, MO Indl Dev Auth Tax Increment Rev Shoppes at North Vlg Proj Ser A.......................................... 5.100 11/01/19 490,655 1,000 Saint Joseph, MO Indl Dev Auth Tax Increment Rev Shoppes at North Vlg Proj Ser A.......................................... 5.500 11/01/27 984,450 4,915 Saline Cnty, MO Indl Dev Auth Hlth Fac Rev (Acquired 01/12/99, Cost $4,827,725) (a)... 6.500 12/01/28 4,990,347 1,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 6.000 06/01/15 1,170,950 -------------- 58,398,877 -------------- NEVADA 0.9% 3,500 Clark Cnty, NV Indl Dev Southwest Gas Corp Proj Ser D1 (AMT) (FGIC Insd).............. 5.250 03/01/38 3,591,665 1,000 Clark Cnty, NV Pollutn Ctl Rev Southn CA Rfdg (AMT)................................. 3.250 06/01/31 975,780 2,000 Director St NV Dept Business & Industry Las Ventanas Retirement Proj Ser A......... 7.000 11/15/34 2,049,820 3,000 Henderson, NV Hlthcare Fac Rev Catholic Hlthcare West Ser A........................ 5.625 07/01/24 3,164,520 1,000 Las Vegas, NV Loc Impt Bds Spl Impt Dist No 607........................................ 6.000 06/01/19 1,030,480 -------------- 10,812,265 -------------- NEW HAMPSHIRE 1.0% 1,500 New Hampshire Higher Ed & Hlth Brewster Academy.................................... 6.750 06/01/25 1,505,520 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Havenwood-Heritage Heights................. 7.350 01/01/18 2,067,080 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Havenwood-Heritage Heights................. 7.450 01/01/25 2,067,080 1,690 New Hampshire Hlth & Ed Fac Auth Rev Huntington At Nashua Ser A................. 6.875 05/01/33 1,729,445 1,000 New Hampshire Hlth & Ed Fac Auth Rev NH College Issue.............................. 7.500 01/01/31 1,078,770 1,500 New Hampshire Hlth & Ed Fac Hlthcare Sys Covenant Hlth.............................. 5.500 07/01/34 1,535,130 1,500 New Hampshire Hlth & Ed Fac Speare Mem Hosp....................................... 5.875 07/01/34 1,516,875 1,000 New Hampshire St Business Fin Auth Rev Alice Peck Day Hlth Sys Ser A.............. 6.875 10/01/19 1,006,490 -------------- 12,506,390 --------------
24 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- NEW JERSEY 5.7% $2,240 Camden Cnty, NJ Impt Auth Lease Rev Dockside Refrig (Acquired 01/29/97, Cost $2,298,570) (a) (e)........................ 8.400% 04/01/24 $ 2,140,589 1,000 Middlesex Cnty, NJ Pollutn Ctl Pollutn Ctl Amerada Rfdg............................... 6.050 09/15/34 1,060,910 2,000 New Jersey Econ Dev Auth Cedar Crest Vlg Inc Fac Ser A.............................. 7.000 11/15/16 2,056,220 2,500 New Jersey Econ Dev Auth Econ Dev Rev Utd Methodist Homes Ser A-1.................... 6.000 07/01/18 2,530,325 2,000 New Jersey Econ Dev Auth First Mtg Franciscan Oaks Proj....................... 5.700 10/01/17 1,986,420 1,000 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.000 11/15/15 1,072,820 1,000 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.125 11/15/18 1,047,980 1,440 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.125 11/15/23 1,547,741 1,000 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06).................................. 8.500 11/01/16 1,107,860 1,500 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06).................................. 8.625 11/01/25 1,664,595 1,510 New Jersey Econ Dev Auth Rev Kullman Assoc Proj Ser A (AMT)........................... 6.125 06/01/18 1,287,683 2,000 New Jersey Econ Dev Auth Rev Sr Living Fac Esplanade Bear (AMT)....................... 7.000 06/01/39 1,661,600 3,000 New Jersey Econ Dev Auth Rev Sr Mtg Arbor Glen Proj Ser A (Prerefunded @ 05/15/06)... 8.750 05/15/26 3,258,450 2,000 New Jersey Econ Dev Auth Spl Fac Rev Continental Airl Inc Proj (AMT)............ 6.250 09/15/19 1,645,980 9,030 New Jersey Econ Dev Auth Spl Fac Rev Continental Airl Inc Proj (AMT)............ 6.400 09/15/23 7,430,606 9,500 New Jersey Econ Dev Auth Spl Fac Rev Continental Airl Inc Proj (AMT)............ 6.250 09/15/29 7,342,550 3,500 New Jersey Econ Dev Auth Utd Methodist Homes NJ Oblig............................. 5.750 07/01/29 3,459,050 3,000 New Jersey Hlth Care Fac Fingcare Inst Inc. Cherry Hill Proj........................... 8.000 07/01/27 3,151,950 3,225 New Jersey Hlthcare Fac Fin Auth Rev Cap Hlth Sys Oblig Grp Ser A................... 5.375 07/01/33 3,294,725 810 New Jersey Hlthcare Fac Fin Auth Rev Raritan Bay Med Ctr Issue Rfdg............. 7.250 07/01/14 854,510 1,030 New Jersey St Ed Fac Auth Rev Felician College of Lodi Ser D (Acquired 11/07/97, Cost $1,030,000) (a)....................... 7.375 11/01/22 1,036,438
See Notes to Financial Statements 25 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- NEW JERSEY (CONTINUED) $8,535 Tobacco Settlement Fin Corp NJ............. 6.750% 06/01/39 $ 8,990,428 5,000 Tobacco Settlement Fin Corp NJ............. 6.250 06/01/43 5,045,550 5,000 Tobacco Settlement Fin Corp NJ Asset Bkd... 6.000 06/01/37 4,988,900 -------------- 69,663,880 -------------- NEW MEXICO 0.6% 4,110 Albuquerque, NM Retirement Fac Rev La Vida Llena Proj Ser B Rfdg...................... 6.600 12/15/28 4,022,786 1,505 Cabezon Pub Impt Dist NM Spl Levg Rev...... 6.000 09/01/24 1,500,636 1,020 New Mexico Hsg Auth Region III Sr Brentwood Gardens Apt Ser A (AMT).................... 6.850 12/01/31 1,041,094 750 Ventana West Pub Impt Dist NM.............. 6.875 08/01/33 761,505 -------------- 7,326,021 -------------- NEW YORK 6.2% 975 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van Allen Proj Ser A........................... 6.875 06/01/39 915,476 1,000 Brookhaven, NY Indl Dev Agy Mem Hosp Med Ctr Inc Ser A.............................. 8.125 11/15/20 1,079,440 1,400 Brookhaven, NY Indl Dev Agy Sr Residential Hsg Rev Woodcrest Estates Fac Ser A (AMT)...................................... 6.375 12/01/37 1,373,456 3,460 Dutchess Cnty, NY Indl Dev Agy Saint Francis Hosp Ser A Rfdg.................... 7.500 03/01/29 3,573,696 2,105 Monroe Cnty, NY Indl Dev Agy Woodland Vlg Proj....................................... 8.000 11/15/15 2,260,265 3,000 New York City Indl Dev Agy JFK Intl Arpt Proj Ser B (AMT)........................... 8.500 08/01/28 2,438,130 5,000 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A...................... 6.250 03/01/15 5,071,000 15,000 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A...................... 6.500 03/01/35 15,325,050 5,000 New York City Muni Wtr Fin Drivers Ser 786 (Inverse Fltg) (Acquired 03/15/05, Cost $5,308,509) (a) (c) (d).................... 7.411 12/15/12 5,260,800 4,800 New York City Ser A........................ 7.000 08/01/07 5,112,672 200 New York City Ser A (Prerefunded @ 08/01/06)................... 7.000 08/01/07 214,270 6,000 New York City Ser D........................ 5.000 11/01/26 6,167,700 5,000 New York City Transitional Drivers Ser 386 (Inverse Fltg) (Acquired 02/02/04, Cost $5,406,301) (a) (c)........................ 7.421 02/01/12 5,468,200 1,360 New York St Dorm Auth Revs NY Methodist Hosp....................................... 5.250 07/01/24 1,419,119 2,000 New York St Dorm Auth Revs NY Methodist Hosp....................................... 5.250 07/01/33 2,070,980 2,500 New York St Energy Resh & Dev Auth Gas Fac Rev (Inverse Fltg) (c)..................... 11.509 04/01/20 3,011,325
26 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,965 Saratoga Cnty, NY Indl Dev Agy Sr Hsg Rev Highpointe at Malta Proj Ser A............. 6.875% 06/01/39 $ 1,845,037 1,000 Suffolk Cnty, NY Gurwin Jewish Phase II.... 6.700 05/01/39 1,020,940 1,000 Suffolk Cnty, NY Indl Dev Agy Continuing Care Retirement Cmnty Rev.................. 7.250 11/01/28 1,058,640 970 Suffolk Cnty, NY Indl Dev Agy Eastern Long Is Hosp Assoc Ser A........................ 7.750 01/01/22 1,013,029 1,400 Suffolk Cnty, NY Indl Dev Agy Indl Dev Rev Spellman High Voltage Fac Ser A (AMT)...... 6.375 12/01/17 1,254,960 1,445 Suffolk Cnty, NY Indl Dev Agy Peconic Landing Ser A.............................. 8.000 10/01/20 1,569,126 1,000 Syracuse, NY Indl Dev Agy Rev First Mtg Jewish Home Ser A.......................... 7.375 03/01/31 1,049,000 2,700 Ulster Cnty, NY Indl Dev Agy Civic Fac Rev Benedictine Hosp Proj Ser A................ 6.450 06/01/24 2,467,422 2,315 Utica, NY Indl Dev Agy Civic Utica College Civic Fac.................................. 6.750 12/01/21 2,383,501 1,000 Westchester Cnty, NY Indl Dev Hebrew Hosp Sr Hsg Inc Ser A........................... 7.375 07/01/30 1,057,550 -------------- 75,480,784 -------------- NORTH CAROLINA 1.3% 2,000 North Carolina Med Care Commn First Mtg Utd Methodist Homes (Prerefunded @ 10/01/09)... 7.000 10/01/17 2,180,320 2,600 North Carolina Med Care Commn Retirement Fac Rev First Mtg Ser A 05................. 5.500 10/01/35 2,534,740 10,000 North Carolina St Rites PA 1246 (Inverse Fltg) (Acquired 03/16/04, Cost $11,658,213) (a) (c).................................... 7.077 03/01/12 11,125,800 -------------- 15,840,860 -------------- NORTH DAKOTA 0.2% 2,000 Grand Forks, ND Sr Hsg Rev Spl Term 4000 Vly Square Proj............................ 6.250 12/01/34 1,905,680 950 Grand Forks, ND Sr Hsg Rev Spl Term 4000 Vly Square Proj............................ 6.375 12/01/34 917,558 -------------- 2,823,238 -------------- OHIO 3.5% 5,000 Athens Cnty, OH Hosp Fac Rev Impt O'Bleness Mem Ser A Rfdg............................. 7.125 11/15/33 5,218,050 3,000 Cleveland-Cuyahoga Cnty, OH Spl Assmt/Tax Increment.................................. 7.000 12/01/18 3,194,910 1,000 Cuyahoga Cnty, OH Hlthcare Fac Franciscan Cnty OH Inc Proj Ser C..................... 6.250 05/15/32 997,320 623 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park Lane Apts Ser A1 Rfdg (h).................. 6.000/7.625 10/01/37 419,260
See Notes to Financial Statements 27 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- OHIO (CONTINUED) $1,081 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park Lane Apts Ser A2 Rfdg (f) (j).............. 5.460% 10/01/37 $ 0 5,000 Cuyahoga Cnty, OH Rev Ser A Rfdg........... 6.000 01/01/32 5,459,500 1,760 Dayton, OH Spl Fac Rev Air Freight Cargo Day LLC Proj (AMT)......................... 6.300 04/01/22 1,595,722 7,510 Erie Cnty, OH Hosp Fac Rev Firelands Regl Med Ctr Ser A.............................. 5.625 08/15/32 7,733,648 5,955 Franklin Cnty, OH Hlthcare Fac Rev & Impt Lutheran Sr City Proj Rfdg................. 6.125 12/15/28 5,686,132 2,600 Franklin Cnty, OH Hlthcare Fac Rev Impt OH Presbyterian Svcs Ser A.................... 5.125 07/01/35 2,561,650 1,500 Lucas Cnty, OH Hlthcare & Impt Sunset Retirement Rfdg............................ 6.500 08/15/20 1,584,255 750 Lucas Cnty, OH Port Auth Rev Saint Mary Woods Proj Ser A........................... 6.000 05/15/24 746,055 2,250 Lucas Cnty, OH Port Auth Rev Saint Mary Woods Proj Ser A........................... 6.000 05/15/34 2,174,220 2,875 Madison Cnty, OH Hosp Impt Rev Madison Cnty Hosp Proj Rfdg............................. 6.400 08/01/28 2,681,455 2,000 Ohio St Environmental Fac Rev Ford Motor Co Proj (AMT)................................. 5.750 04/01/35 2,014,520 -------------- 42,066,697 -------------- OKLAHOMA 2.3% 1,000 Citizen Potawatomi Nation, OK Ser A........ 6.500 09/01/16 1,010,280 605 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.000 08/01/10 608,515 750 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.400 08/01/17 755,565 1,000 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.625 08/01/20 1,011,560 1,000 Oklahoma Cnty, OK Fin Auth Epworth Villa Proj Ser A Rfdg............................ 7.000 04/01/25 1,006,210 2,000 Oklahoma Cnty, OK Fin Auth Rev Epworth Villa Proj Rfdg............................ 6.000 04/01/18 1,986,660 1,065 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg (Prerefunded @ 08/15/09).................................. 5.750 08/15/12 1,171,383 1,000 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg (Prerefunded @ 08/15/09).................................. 5.750 08/15/15 1,099,890 4,000 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg (Prerefunded @ 08/15/09).................................. 5.625 08/15/19 4,379,440 3,250 Tulsa Cnty, OK Pub Fac Auth (AMBAC Insd)... 6.250 11/01/22 3,694,145
28 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- OKLAHOMA (CONTINUED) $3,000 Tulsa, OK Muni Arpt Tr Rev Amern Airl Proj Rfdg....................................... 6.250% 06/01/20 $ 2,517,810 8,855 Tulsa, OK Muni Arpt Tr Rev Ser A Rfdg (AMT)...................................... 7.750 06/01/35 8,955,416 -------------- 28,196,874 -------------- OREGON 1.1% 2,000 Clackamas Cnty, OR Hosp Fac Willamette View Inc Proj Ser A............................. 7.500 11/01/29 2,119,200 2,145 Clatsop Care Ctr Hlth Dist OR Rev Sr Hsg... 6.875 08/01/28 2,153,730 2,500 Multnomah Cnty, OR Hosp Fac Auth Rev Terwilliger Plaza Proj Rfdg (Acquired 05/21/04, Cost $2,442,200) (a)............. 6.500 12/01/29 2,540,175 5,178 Oregon St Hlth Hsg Ed & Cultural Fac Auth (AMT)...................................... 7.250 06/01/28 5,203,439 995 Oregon St Hlth Hsg Ed Auth Ore Baptist Retirement Homes Ser A..................... 8.000 11/15/26 1,036,651 -------------- 13,053,195 -------------- PENNSYLVANIA 6.3% 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/15 2,351,580 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/22 2,351,580 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/30 2,351,580 2,000 Allegheny Cnty, PA Indl Dev Auth Lease Rev (AMT)...................................... 6.625 09/01/24 1,887,720 1,500 Allegheny, PA Rev Auth Pittsburgh Mills Proj....................................... 5.600 07/01/23 1,574,490 6,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev Collateral Toledo Edison Co Proj Ser A Rfdg....................................... 7.750 05/01/20 6,305,700 1,000 Berks Cnty, PA Muni Auth Rev Phoebe Berks Vlg Inc Proj Rfdg (Prerefunded @ 05/15/06).................................. 7.700 05/15/22 1,071,680 550 Blair Cnty, PA Indl Dev Auth Vlg PA St Proj Ser A...................................... 6.900 01/01/22 581,708 1,000 Bucks Cnty, PA Indl Dev Auth Rev First Mtg Hlthcare Fac Chandler...................... 6.200 05/01/19 1,015,230 1,500 Chester Cnty, PA Hlth & Ed Fac Chester Cnty Hosp Ser A................................. 6.750 07/01/31 1,585,455 2,500 Cliff House Ctf Trust Var Sts Ctf Part Ser A (AMT).................................... 6.625 06/01/27 1,901,550 2,000 Cumberland Cnty, PA Indl Dev Auth Rev First Mtg Woods Cedar Run Ser A Rfdg (e)......... 6.500 11/01/28 668,080 3,000 Dauphin Cnty, PA Gen Auth Rev Office & Pkg Riverfront Office.......................... 6.000 01/01/25 2,699,490 2,200 Indiana Cnty, PA Indl Dev Auth PSEG Pwr LLC Proj Rfdg (AMT)............................ 5.850 06/01/27 2,302,916 1,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Ctr Saint Anne's Home.......................... 6.625 04/01/28 1,000,960 1,200 Lehigh Cnty, PA Gen Purp Auth First Mtg Bible Fellowship Church.................... 7.625 11/01/21 1,306,500
See Notes to Financial Statements 29 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) $3,000 Lehigh Cnty, PA Gen Purp Auth Rev Good Shepherd Grp Ser A......................... 5.500% 11/01/24 $ 3,073,260 2,000 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace Oblig Grp Rfdg............................. 6.000 11/01/23 1,735,840 1,000 Lehigh Cnty, PA Indl Dev Auth Hlth Fac Rev Lifepath Inc Proj.......................... 6.100 06/01/18 898,670 500 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The Meadowood Corp Rfdg (Prerefunded @ 12/01/05).................................. 7.000 12/01/10 523,580 2,500 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The Meadowood Corp Rfdg (Prerefunded @ 12/01/05).................................. 7.250 12/01/15 2,621,975 6,000 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The Meadowood Corp Rfdg (Prerefunded @ 12/01/05).................................. 7.400 12/01/20 6,298,440 1,085 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj.................. 6.000 02/01/21 1,102,935 4,500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj.................. 6.250 02/01/35 4,595,580 1,415 Northeastern PA Hosp & Ed Auth Hlthcare Rev........................................ 7.125 10/01/29 1,396,464 1,500 Pennsylvania Econ Dev Fin Auth Reliant Energy Ser A (AMT)......................... 6.750 12/01/36 1,607,565 3,000 Pennsylvania Econ Dev Fin Auth Reliant Energy Seward Ser A (AMT).................. 6.750 12/01/36 3,215,130 3,000 Pennsylvania Econ Dev Fin Auth Res Recovery Rev Colver Proj Ser D (AMT)................ 7.050 12/01/10 3,070,080 980 Pennsylvania St Higher Ed Student Assn Inc Proj Ser A................................. 6.750 09/01/32 1,024,247 2,150 Philadelphia, PA Auth Indl Dev Rev Coml Dev Rfdg....................................... 7.750 12/01/17 2,196,956 4,105 Philadelphia, PA Gas Wks Rev Drivers Ser 384 (Inverse Fltg) (Acquired 01/20/04, Cost $4,842,024) (FSA Insd) (a) (c)............. 8.171 07/01/11 4,697,721 2,140 Philadelphia, PA Hosp & Higher Ed Fac Auth Rev Centralized Comp Human Svcs Ser A...... 6.125 01/01/13 2,118,343 1,500 Scranton Lackawanna, PA Hlth & Welfare Auth Rev Rfdg (Prerefunded @ 01/15/07).......... 7.250 01/15/17 1,631,730 2,000 Scranton Lackawanna, PA Hlth & Welfare Auth Rev Rfdg (Prerefunded @ 01/15/07).......... 7.350 01/15/22 2,178,940 1,500 Westmoreland Cnty, PA Indl Dev Hlthcare Fac Redstone Ser B............................. 8.000 11/15/23 1,606,095 -------------- 76,549,770 --------------
30 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- RHODE ISLAND 0.5% $1,825 Rhode Island St Econ Dev Corp Rev Oblig Providence Place........................... 7.250% 07/01/20 $ 1,774,466 1,000 Rhode Island St Hlth & Ed Hosp Fin Ser A... 6.000 09/15/33 1,011,600 3,000 Tobacco Settlement Fin Corp RI Asset Bkd Ser A...................................... 6.000 06/01/23 3,031,860 -------------- 5,817,926 -------------- SOUTH CAROLINA 1.1% 1,570 South Carolina Jobs Econ Dev Auth Hosp Fac Rev Impt Palmetto Hlth Alliance Ser A Rfdg....................................... 6.250 08/01/31 1,684,045 2,965 South Carolina Jobs Econ Dev Auth Student Hdg Rev Drivers Ser 650 (Inverse Fltg) (Acquired 12/17/04, Cost $3,421,808) (MBIA Insd) (a) (c).............................. 7.381 08/01/12 3,386,890 1,000 South Carolina Jobs Econ Dev Episcopal Home Still Proj A............................... 6.000 05/15/17 1,014,270 2,000 South Carolina Jobs Econ Dev First Mtg Westley Commons Proj....................... 7.750 10/01/24 2,150,860 2,000 South Carolina Jobs Econ Dev First Mtg Westley Commons Proj....................... 8.000 10/01/31 2,164,060 3,000 Tobacco Settlement Rev Mgmt Auth SC Tob Settlement Rev Ser B....................... 6.375 05/15/28 3,061,560 -------------- 13,461,685 -------------- SOUTH DAKOTA 0.6% 1,010 Keystone, SD Econ Dev Rev Wtr Quality Mgmt Corp Ser A (AMT)........................... 6.000 12/15/18 1,004,213 5,490 Sioux Falls, SD Multi-Family Hsg Inn Westport Proj Ser A (Acquired 01/26/04, Cost $5,647,856) (a)....................... 7.500 12/01/34 5,695,326 1,050 South Dakota St Hlth & Ed Fac Auth Rev Sioux VY Hosp & Hlth Sys Ser A............. 5.250 11/01/34 1,066,307 -------------- 7,765,846 -------------- TENNESSEE 1.4% 3,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg (MBIA Insd)................................ 7.750 07/01/29 3,745,380 1,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn States Hlth Ser A Rfdg....... 7.500 07/01/33 1,181,450 1,000 Johnson City, TN Hlth & Ed Facs Brd Retirement Fac Rev Appalachian Christian Vlg Proj Ser A............................. 6.250 02/15/32 987,090 1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg Ser A...................................... 7.000 12/01/23 1,021,730 1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg Ser A...................................... 7.250 12/01/34 1,025,550 5,320 Sullivan Cnty, TN Hlth Ed & Hsg Fac Brd Rev................................ 8.410 11/01/19 5,456,830
See Notes to Financial Statements 31 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- TENNESSEE (CONTINUED) $2,815 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj Ser A (Acquired 06/08/89, Cost $2,815,000) (a)........................................ 10.000% 11/01/19 $ 3,026,322 1,160 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj Ser B (Acquired 06/08/89, Cost $1,160,000) (a) (f) (g)................................ 10.000 11/01/20 123,737 -------------- 16,568,089 -------------- TEXAS 7.2% 560 Abia Dev Corp TX Arpt Fac Rev Austin Belly Port Dev LLC Proj Ser A (AMT).............. 6.250 10/01/08 557,749 3,000 Abia Dev Corp TX Arpt Fac Rev Austin Belly Port Dev LLC Proj Ser A (AMT).............. 6.500 10/01/23 2,841,270 1,000 Atlanta, TX Hosp Auth Fac Rev.............. 6.700 08/01/19 972,120 2,035 Atlanta, TX Hosp Auth Fac Rev.............. 6.750 08/01/29 1,950,527 1,000 Austin-Bergstorm Landhost Enterprises Inc TX Arpt Hotel Sr Ser A (e)................. 6.750 04/01/27 477,890 995 Bexar Cnty, TX Hsg Fin Corp Multi-Family Hsg Rev Woodland Ridge Apt Proj Ser A...... 7.000 01/01/39 960,603 2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp..... 5.375 01/01/32 2,028,400 735 Comal Cnty, TX Hlth Fac Dev Hlthcare Sys McKenna Mem Proj Ser A..................... 6.250 02/01/32 756,168 1,825 Dallas Cnty, TX Flood Ctl Dist No 1 Cap Apprec Rfdg (Acquired 08/28/89, Cost $1,062,379) (a)............................ * 08/01/11 1,131,993 3,445 Dallas Cnty, TX Flood Ctl Dist No 1 Rfdg... 7.250 04/01/32 3,549,073 2,970 Dallas, TX Wtrwks & Swr Sys Rev Rfdg (Prerefunded @ 10/01/10)................... 5.750 10/01/17 3,311,906 2,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth Sys Ser A.................................. 7.000 09/01/25 2,679,550 3,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth Sys Ser A.................................. 7.125 09/01/34 3,743,775 6,400 Houston, TX Arpt Sys Rev Spl Fac Continental Airl Ser B (AMT)............... 6.125 07/15/17 5,302,656 3,000 Houston, TX Arpt Sys Rev Spl Fac Continental Airl Ser C (AMT)............... 5.700 07/15/29 2,143,350 6,580 Houston, TX Arpt Sys Rev Spl Fac Continental Airl Ser E (AMT)............... 6.750 07/01/29 5,448,635 1,750 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT) (FSA Insd)........................... 5.125 07/01/32 1,777,598 3,000 Houston, TX Hlth Fac Dev Corp Buckingham Sr Living Cmnty Ser A......................... 7.125 02/15/34 3,210,720 3,750 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $3,784,875) (FSA Insd) (a) (c)............. 8.793 05/15/15 4,500,488
32 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $8,880 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $9,015,323) (FSA Insd) (a) (c)............. 8.793% 05/15/14 $ 10,650,672 1,445 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg Carillon Proj Ser A (e).................... 6.500 07/01/19 1,201,084 2,270 Lufkin, TX Hlth Fac Dev Corp Hlth Sys Rev Mem Hlth Sys of East TX Rfdg............... 5.700 02/15/28 2,309,952 2,275 Meadow Parc Dev Inc TX Multi-Family Rev Hsg Meadow Parc Apt Proj....................... 6.500 12/01/30 2,078,417 2,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj........................ 7.250 01/01/31 2,476,000 2,820 Midlothian, TX Dev Auth Tax Increment Contract Rev............................... 6.700 11/15/23 2,908,153 2,000 Midlothian, TX Dev Auth Tax Increment Contract Rev............................... 7.875 11/15/26 2,210,380 1,500 Midlothian, TX Dev Auth Tax Increment Contract Rev (Acquired 12/02/04, Cost $1,500,000) (a)............................ 6.200 11/15/29 1,502,340 1,000 Richardson, TX Hosp Auth Rev Baylor & Richardson Impt Rfdg....................... 5.625 12/01/28 1,027,140 250 San Antonio, TX Hlth Fac Dev Corp Rev Encore Nursing Ctr Part.................... 8.250 12/01/19 251,203 1,549 Texas Gen Svcs Comm Part Interests......... 7.250 08/01/11 1,570,738 1,850 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev (AMT) (GNMA Collateralized)............ 6.900 07/02/24 1,868,297 30 Texas St Higher Ed Coordinating Brd College Student Ln Rev (AMT)....................... 7.849 10/01/25 30,183 1,675 Texas St Pub Fin Auth Sch Excellence Ed Proj Ser A (Acquired 12/02/04, Cost $1,654,253) (a)............................ 7.000 12/01/34 1,658,250 1,500 Texas St Student Hsg Corp MSU Proj Midwestern St Univ......................... 6.500 09/01/34 1,574,055 2,950 Tomball, TX Hosp Auth Rev Hosp Tomball Regl Hosp....................................... 6.000 07/01/29 2,960,325 965 Wichita Cnty, TX Hlth Fac Rolling Meadows Fac Ser A Rfdg............................. 6.250 01/01/28 954,491 2,500 Woodhill Pub Fac Corp TX Hsg-Woodhill Apt Proj....................................... 7.500 12/01/29 2,498,225 -------------- 87,074,376 -------------- UTAH 0.3% 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (f)................................... 7.800 09/01/15 205,000 1,165 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (f)................................... 8.000 09/01/20 238,825 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (f)................................... 7.800 09/01/25 205,000
See Notes to Financial Statements 33 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- UTAH (CONTINUED) $2,430 Utah St Hsg Fin Agy Rev RHA Cmnty Svc Proj Ser A...................................... 6.875% 07/01/27 $ 2,363,637 80 Utah St Hsg Fin Agy Single Family Mtg Mezz A1 (AMBAC Insd)............................ 6.100 07/01/13 82,534 -------------- 3,094,996 -------------- VERMONT 0.2% 1,015 Vermont Ed & Hlth Bldg Fin Agy Rev Hlthcare Fac Copley Manor Proj (e).................. 6.250 04/01/29 711,799 1,000 Vermont Ed & Hlth Bldg Fin Agy Rev VT Council Dev Mental Hlth Ser A.............. 6.000 12/15/09 1,071,610 1,000 Vermont Ed & Hlth Bldg Fin Bennington College Proj............................... 6.625 10/01/29 1,012,170 -------------- 2,795,579 -------------- VIRGINIA 1.0% 930 Greensville Cnty, VA Indl Dev Wheeling Steel Proj Ser A (AMT)..................... 7.000 04/01/14 656,599 2,500 Henrico Cnty, VA Econ Dev Auth Residential Care Fac Rev Utd Methodist Ser A Rfdg...... 6.500 06/01/22 2,625,225 6,000 Peninsula Port Auth VA Residential Care Fac Rev VA Baptist Homes Ser A................. 7.375 12/01/32 6,286,320 1,000 Roanoke Cnty, VA Indl Dev Auth Glebe Inc Ser A...................................... 6.300 07/01/35 1,013,860 1,700 Virginia Small Business Fin Auth Rev Indl Dev SIL Clean Wtr Proj (AMT)............... 7.250 11/01/24 1,693,166 -------------- 12,275,170 -------------- WASHINGTON 1.7% 6,580 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd).......................... 5.500 07/01/17 7,174,635 1,000 King Cnty, WA Pub Hosp Dist No 004 Snoqualmie Vly Hosp........................ 7.250 12/01/15 1,032,710 1,000 Port Seattle, WA Spl Fac Rev Northwest Airl Proj (AMT)................................. 7.125 04/01/20 949,790 2,000 Port Seattle, WA Spl Fac Rev Northwest Airl Proj (AMT)................................. 7.250 04/01/30 1,882,920 8,830 Tobacco Settlement Auth WA Asset Bkd....... 6.625 06/01/32 9,138,079 -------------- 20,178,134 -------------- WISCONSIN 1.4% 800 Baldwin, WI Hosp Rev Mtg Ser A............. 6.125 12/01/18 800,792 1,000 Baldwin, WI Hosp Rev Mtg Ser A............. 6.375 12/01/28 1,002,190 1,745 Milwaukee, WI Rev Sr Air Cargo (AMT)....... 6.500 01/01/25 1,827,940 2,000 Wisconsin St Hlth & Ed Fac Auth Rev Aurora Hlthcare Inc Ser A......................... 5.600 02/15/29 2,032,180 3,000 Wisconsin St Hlth & Ed Fac Auth Rev Milwaukee Catholic Home Inc Proj........... 7.500 07/01/26 3,062,790
34 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 1,033,430 1,000 Wisconsin St Hlth & Ed Fac Divine Savior Hlthcare Ser C............................. 7.500 05/01/32 1,046,170 2,000 Wisconsin St Hlth & Ed Fac Fort Hlthcare Inc Proj................................... 6.100 05/01/34 2,093,520 1,500 Wisconsin St Hlth & Ed Fac Southwest Hlth Ctr Ser A.................................. 6.125 04/01/24 1,476,540 750 Wisconsin Hlth & Ed Fac Eastcastle Place Inc Proj................................... 6.000 12/01/24 747,015 1,500 Wisconsin St Hlth & Ed Fac Beaver Dam Cmnty Hosp Inc Ser A............................. 6.750 08/15/34 1,541,430 -------------- 16,663,997 -------------- WYOMING 0.1% 1,500 Teton Cnty, WY Hosp Dist Hosp Saint Johns Med Ctr.................................... 6.750 12/01/27 1,514,985 -------------- PUERTO RICO 1.0% 5,000 Puerto Rico Elec Pwr Auth Ser RR (FGIC Insd) (b).................................. 5.000 07/01/35 5,221,950 2,465 Puerto Rico Port Auth Rev Spl Fac Amern Airl Ser A (AMT)........................... 6.250 06/01/26 1,733,782 5,000 Puerto Rico Pub Bldg Auth Rev Govt Fac Ser I.......................................... 5.250 07/01/33 5,246,100 -------------- 12,201,832 -------------- U.S. VIRGIN ISLANDS 0.3% 2,500 Northern Mariana Islands Ser A............. 7.375 06/01/30 2,705,150 1,000 Virgin Islands Pub Fin Auth Resr Secd-Hovensa Refinery (AMT)................ 5.875 07/01/22 1,061,190 -------------- 3,766,340 -------------- TOTAL LONG-TERM INVESTMENTS 100.4% (Cost $1,212,683,020)...................................................... 1,217,091,119 SHORT-TERM INVESTMENTS 0.6% (Cost $6,800,000).......................................................... 6,800,000 -------------- TOTAL INVESTMENTS 101.0% (Cost $1,219,483,020)...................................................... 1,223,891,119 LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%)................................ (12,108,808) -------------- NET ASSETS 100.0%........................................................... $1,211,782,311 ==============
See Notes to Financial Statements 35 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 11.4% of net assets. (b) Securities purchased on a when-issued or delayed delivery basis. (c) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. (d) The Fund owns 100% of the bond issuance. (e) Interest is accruing at less than the stated coupon. (f) Non-income producing security. (g) This borrower has filed for protection in federal bankruptcy court. (h) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (i) Payment-in-kind security. (j) Market value is determined in accordance with procedures established in good faith by the Board of Trustees. (k) All or a portion of these securities have been physically segregated in connection with open futures contracts. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association MBIA--Municipal Bond Investors Assurance Corp. 36 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2005 (Unaudited) ASSETS: Total Investments (Cost $1,219,483,020)..................... $1,223,891,119 Cash........................................................ 130,600 Receivables: Interest.................................................. 21,939,647 Fund Shares Sold.......................................... 7,009,566 Investments Sold.......................................... 899,000 Other....................................................... 158,889 -------------- Total Assets............................................ 1,254,028,821 -------------- LIABILITIES: Payables: Investments Purchased..................................... 36,171,073 Fund Shares Repurchased................................... 2,237,390 Income Distributions...................................... 1,820,940 Distributor and Affiliates................................ 679,058 Investment Advisory Fee................................... 477,518 Variation Margin on Futures............................... 470,713 Trustees' Deferred Compensation and Retirement Plans........ 220,430 Accrued Expenses............................................ 169,388 -------------- Total Liabilities....................................... 42,246,510 -------------- NET ASSETS.................................................. $1,211,782,311 ============== NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $1,313,106,149 Net Unrealized Appreciation................................. 3,731,262 Accumulated Undistributed Net Investment Income............. 47,024 Accumulated Net Realized Loss............................... (105,102,124) -------------- NET ASSETS.................................................. $1,211,782,311 ============== MAXIMUM OFFERING PRICE PER COMMON SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $953,452,128 and 72,634,596 shares of beneficial interest issued and outstanding)............. $ 13.13 Maximum sales charge (4.75%* of offering price)......... .65 -------------- Maximum offering price to public........................ $ 13.78 ============== Class B Shares: Net asset value and offering price per share (Based on net assets of $133,464,620 and 10,172,080 shares of beneficial interest issued and outstanding)............. $ 13.12 ============== Class C Shares: Net asset value and offering price per share (Based on net assets of $124,865,563 and 9,446,280 shares of beneficial interest issued and outstanding)............. $ 13.22 ==============
* On sales of $100,000 or more, the sales charge will be reduced. See Notes to Financial Statements 37 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2005 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 34,370,809 ------------ EXPENSES: Investment Advisory Fee..................................... 2,548,118 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $1,042,491, $645,976 and $512,465, respectively)............................................. 2,200,932 Shareholder Services........................................ 267,940 Legal....................................................... 85,992 Custody..................................................... 43,120 Trustees' Fees and Related Expenses......................... 14,731 Other....................................................... 232,805 ------------ Total Expenses.......................................... 5,393,638 Less Credits Earned on Cash Balances.................... 20,072 ------------ Net Expenses............................................ 5,373,566 ------------ NET INVESTMENT INCOME....................................... $ 28,997,243 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ (6,389,436) Futures................................................... 2,575,122 ------------ Net Realized Loss........................................... (3,814,314) ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... (10,959,084) ------------ End of the Period: Investments............................................. 4,408,099 Futures................................................. (676,837) ------------ 3,731,262 ------------ Net Unrealized Appreciation During the Period............... 14,690,346 ------------ NET REALIZED AND UNREALIZED GAIN............................ $ 10,876,032 ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 39,873,275 ============
38 See Notes to Financial Statements 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, 2005 SEPTEMBER 30, 2004 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 28,997,243 $ 45,887,234 Net Realized Loss.................................... (3,814,314) (27,452,425) Net Unrealized Appreciation During the Period........ 14,690,346 26,901,695 -------------- ------------- Change in Net Assets from Operations................. 39,873,275 45,336,504 -------------- ------------- Distributions from Net Investment Income: Class A Shares..................................... (24,626,335) (38,473,790) Class B Shares..................................... (3,287,099) (6,237,920) Class C Shares..................................... (2,577,704) (2,997,702) -------------- ------------- Total Distributions.................................. (30,491,138) (47,709,412) -------------- ------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... 9,382,137 (2,372,908) -------------- ------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 330,117,823 368,145,718 Net Asset Value of Shares Issued Through Dividend Reinvestment.............................. 20,123,288 30,424,886 Cost of Shares Repurchased........................... (121,727,116) (133,088,608) -------------- ------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 228,513,995 265,481,996 -------------- ------------- TOTAL INCREASE IN NET ASSETS......................... 237,896,132 263,109,088 NET ASSETS: Beginning of the Period.............................. 973,886,179 710,777,091 -------------- ------------- End of the Period (Including accumulated undistributed net investment income of $47,024 and $1,540,919, respectively).......................... $1,211,782,311 $ 973,886,179 ============== =============
See Notes to Financial Statements 39 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (A) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $13.00 $13.03 $13.21 $13.25 $13.27 $13.91 ------ ------ ------ ------ ------ ------ Net Investment Income........... .36(c) .74(c) .79 .78 .77 .77 Net Realized and Unrealized Gain/Loss..................... .15 -0- (.25) (.11) (.05) (.63) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .51 .74 .54 .67 .72 .14 Less Distributions from Net Investment Income............... .38 .77 .72 .71 .74 .78 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.13 $13.00 $13.03 $13.21 $13.25 $13.27 ====== ====== ====== ====== ====== ====== Total Return (b).................. 3.98%* 5.87% 4.21% 5.28% 5.46% 1.27% Net Assets at End of the Period (In millions)................... $953.5 $766.1 $560.9 $579.1 $607.1 $621.5 Ratio of Expenses to Average Net Assets.......................... .84% .91% .89% .86% .87% .91% Ratio of Net Investment Income to Average Net Assets.............. 5.53% 5.74% 6.07% 5.99% 5.88% 5.91% Portfolio Turnover................ 22%* 16% 14% 14% 22% 37%
* Non-Annualized (a) As required, effective October 31, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 5.95% to 5.99%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. With respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Based on average shares outstanding. 40 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (A) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $12.99 $13.02 $13.20 $13.24 $13.27 $13.90 ------ ------ ------ ------ ------ ------ Net Investment Income........... .31(c) .65(c) .69(c) .70 .68 .69 Net Realized and Unrealized Gain/Loss..................... .15 (.01) (.25) (.12) (.06) (.64) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .46 .64 .44 .58 .62 .05 Less Distributions from Net Investment Income............... .33 .67 .62 .62 .65 .68 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.12 $12.99 $13.02 $13.20 $13.24 $13.27 ====== ====== ====== ====== ====== ====== Total Return (b).................. 3.59%* 5.07% 3.42% 4.49% 4.71% .48% Net Assets at End of the Period (In millions)................... $133.5 $123.8 $115.6 $149.5 $176.5 $221.4 Ratio of Expenses to Average Net Assets.......................... 1.60% 1.67% 1.64% 1.62% 1.63% 1.67% Ratio of Net Investment Income to Average Net Assets.............. 4.78% 5.00% 5.32% 5.23% 5.12% 5.15% Portfolio Turnover................ 22%* 16% 14% 14% 22% 37%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 5.19% to 5.23%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4% charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Based on average shares outstanding. See Notes to Financial Statements 41 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (A) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $13.09 $13.11 $13.20 $13.24 $13.27 $13.90 ------ ------ ------ ------ ------ ------ Net Investment Income........... .31(d) .64(d) .79(d) .70 .68 .69 Net Realized and Unrealized Gain/Loss..................... .15 .01 (.26) (.12) (.06) (.64) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .46 .65 .53 .58 .62 .05 Less Distributions from Net Investment Income............... .33 .67 .62 .62 .65 .68 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.22 $13.09 $13.11 $13.20 $13.24 $13.27 ====== ====== ====== ====== ====== ====== Total Return (b).................. 3.56%* 5.10%(e) 4.10%(c) 4.49% 4.71% .48% Net Assets at End of the Period (In millions)................... $124.9 $ 84.0 $ 34.3 $ 38.5 $ 44.4 $ 49.1 Ratio of Expenses to Average Net Assets.......................... 1.59% 1.65%(e) 1.64% 1.62% 1.62% 1.67% Ratio of Net Investment Income to Average Net Assets.............. 4.77% 4.94%(e) 6.00%(c) 5.23% 5.13% 5.15% Portfolio Turnover................ 22%* 16% 14% 14% 22% 37%
* Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01, and increase the ratio of net investment income to average net assets from 5.19% to 5.23%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .68% and .69%, respectively. (d) Based on average shares outstanding. (e) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less that 1% (See footnote 6). 42 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Strategic Municipal Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors a high level of current income exempt from federal income tax primarily through investment in a diversified portfolio of medium- and lower-grade municipal securities. The Fund commenced investment operations on June 28, 1985. The distribution of the Fund's Class B and Class C shares commenced on April 30, 1993 and August 13, 1993, respectively. The Fund registered Class I Shares on December 30, 2004. There were no sales of Class I Shares for the period ended March 31, 2005. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Legal expenditures that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2005, the Fund had $30,480,257 of when-issued or delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. 43 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset these losses against any future realized capital gains. At September 30, 2004, the Fund had an accumulated capital loss carryforward for tax purposes of $72,989,958, which will expire according to the following schedule.
AMOUNT EXPIRATION $ 9,854,061................................................. September 30, 2005 1,076,939................................................. September 30, 2006 9,610,374................................................. September 30, 2008 10,147,307................................................. September 30, 2009 16,221,240................................................. September 30, 2010 22,472,916................................................. September 30, 2011 3,607,121................................................. September 30, 2012
At March 31, 2005, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $1,219,115,003 ============== Gross tax unrealized appreciation........................... $ 39,849,348 Gross tax unrealized depreciation........................... (35,073,232) -------------- Net tax unrealized appreciation on investments.............. $ 4,776,116 ==============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2004 is as follows:
2004 Distributions paid from: Ordinary income........................................... $115,296 Long-term capital gain.................................... -0- -------- $115,296 ========
As of September 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $1,403
44 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of the deferral of losses related to wash sale transactions and the capitalization of reorganization and restructuring costs, and losses recognized for tax purposes but not for book purposes. F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's custody fee was reduced by $20,072 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
For the six months ended March 31, 2005, the Fund recognized expenses of approximately $6,200 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $44,600 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent of the Fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $222,300 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are also officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $138,024 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2005. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 45 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2005, capital aggregated $1,034,009,310, $151,726,739 and $127,370,100 for Classes A, B and C, respectively. For the six months ended March 31, 2005, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 19,272,508 $ 252,873,528 Class B................................................... 1,971,217 25,816,152 Class C................................................... 3,892,543 51,428,143 ---------- ------------- Total Sales................................................. 25,136,268 $ 330,117,823 ========== ============= Dividend Reinvestment: Class A................................................... 1,266,657 $ 16,616,131 Class B................................................... 155,665 2,040,382 Class C................................................... 111,042 1,466,775 ---------- ------------- Total Dividend Reinvestment................................. 1,533,364 $ 20,123,288 ========== ============= Repurchases: Class A................................................... (6,840,481) $ (89,410,422) Class B................................................... (1,482,100) (19,416,641) Class C................................................... (978,262) (12,900,053) ---------- ------------- Total Repurchases........................................... (9,300,843) $(121,727,116) ========== =============
At September 30, 2004, capital aggregated $853,930,073, $143,286,846 and $87,375,235 for Classes A, B and C, respectively. For the year ended September 30, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 20,778,883 $ 270,278,898 Class B................................................... 2,866,387 37,221,319 Class C................................................... 4,630,792 60,645,501 ----------- ------------- Total Sales................................................. 28,276,062 $ 368,145,718 =========== ============= Dividend Reinvestment: Class A................................................... 1,924,479 $ 24,925,465 Class B................................................... 282,301 3,654,185 Class C................................................... 141,730 1,845,236 ----------- ------------- Total Dividend Reinvestment................................. 2,348,510 $ 30,424,886 =========== ============= Repurchases: Class A................................................... (6,820,426) $ (88,176,943) Class B................................................... (2,498,494) (32,303,015) Class C................................................... (970,228) (12,608,650) ----------- ------------- Total Repurchases........................................... (10,289,148) $(133,088,608) =========== =============
46 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996 and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares seven years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2005 and the year ended September 30, 2004, 662,592 and 351,113 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received thereon, automatically convert to Class A Shares ten years after the end of the calendar month in which the shares are purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2005 and the year ended September 30, 2004, 45,914 and 0 Class C Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class C Shares. Class B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C Shares will be imposed on most redemptions made within six years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
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, 2005, Van Kampen, as distributor for the Fund, received commissions on sales of the Fund's Class A shares of approximately $627,000 and CDSC on redeemed shares of approximately $110,000. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $488,841,428 and $234,092,284, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. 47 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio, to manage the portfolio's effective yield, maturity and duration, or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counter parties to meet the terms of their contracts. During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Securities and typically closes the contract prior to the delivery date. These contracts are generally used to manage the Fund's effective maturity and duration. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2005, were as follows:
CONTRACTS Outstanding at September 30, 2004........................... -0- Futures Opened.............................................. 2,700 Futures Closed.............................................. (1,850) ------ Outstanding at March 31, 2005............................... 850 ======
The futures contracts outstanding as of March 31, 2005, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Bonds Futures June 2005 (Current Notional Value of $111,375 per contract)........................... 450 $(453,362) U.S. Treasury Notes 10-Year Futures June 2005 (Current Notional Value of $109,266 per contract).................. 400 (223,475) --- --------- 850 $(676,837) === =========
48 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to 0.25% of Class A average daily net assets and up to 1.00% each for Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $2,710,700 and $325,900 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2005, are payments retained by Van Kampen of approximately $816,800 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $38,100. 7. LEGAL MATTERS. The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. The consolidated action also names as defendants certain individual Trustees and Directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of certain Van Kampen funds; the named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of proprietary mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with 49 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued the consolidated complaint described in the preceding paragraph. Plaintiff has sought leave to file a second amended derivative complaint that alleges that the Adviser permitted or recklessly disregarded market timing and later trading in its proprietary mutual funds in order to increase assets under management and fees. However, pursuant to an agreement between the parties, the plaintiff's proposed second amended derivative complaint was withdrawn and the allegations regarding market timing and late trading asserted therein were filed in a separate complaint and coordinated with other cases related to market timing that have been centralized in a federal court. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 8. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 50 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* - President and Chief Executive Officer JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 51 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 139, 399, 539 STMI SAR 5/05 RN05-01068P-Y03/05 (VAN KAMPEN INVESTMENTS LOGO) Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen California Insured Tax Free Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2005. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/05
A SHARES B SHARES C SHARES since 12/13/85 since 4/30/93 since 8/13/93 -------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 3.25% 3.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 7.00% 6.82% 5.00% 5.00% 4.51% 4.51% 10-year 5.87 5.52 5.41 5.41 5.11 5.11 5-year 6.10 5.40 5.51 5.51 5.33 5.33 1-year 2.39 -0.94 2.43 -0.53 1.74 0.76 6-month 1.08 -2.23 1.08 -1.89 0.71 -0.28 -------------------------------------------------------------------------------------------- SEC Yield 2.97% 2.29% 2.32%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 3.25 percent for Class A shares, a contingent deferred sales charge of 3.00 percent for Class B shares (in year one and declining to zero after year four), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares six years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Source for index performance: Lipper Inc. 1 Fund Report FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005 Van Kampen California Insured Tax Free Fund is managed by the Adviser's Municipal Fixed-Income team.(1) Members of the team include Dennis S. Pietrzak and John R. Reynoldson, Executive Directors of the Adviser; and Joseph A. Piraro, Vice President of the Adviser. MARKET CONDITIONS The six-month period ended March 31, 2005, was characterized by continued short-term interest rate increases, and the specter of rising inflation resulting from record-high crude oil prices. The Federal Open Market Committee (the "Fed") raised the federal funds target rate 100 basis points during the period through a series of four, "measured" 0.25 percent tightenings to 2.75 percent by the end of March. Although rates in the short and intermediate areas of the yield curve shifted upward as the Fed tightened, long-term interest rates fell as buyers did not seem deterred by the prospect of rising inflation. As a result, the yield curve (the difference between short and longer-term yields) flattened and the long end of the municipal market handily outperformed the shorter end. The municipal market in total posted positive returns during the period, though it was not uniformly strong. In contrast to the strong showing by longer-term bonds, shorter-term municipals were hampered by the Fed's tightening and turned in a slightly negative showing. Within the investment-grade segment of the market, yield differentials between BBB-rated municipals and AAA-rated securities were flat to slightly wider, though BBB-rated securities still outperformed high grades due to their higher coupons, while securities rated below investment grade strongly outperformed as investors sought out their higher yields. The Fed's interest rate hikes did not dampen investors' appetites for municipal bonds, as net inflows into municipal bond funds topped $700 million during the period. The supply of new issues was modest during the closing months of 2004 (the first half of the period) before soaring in the opening months of 2005 as long-term issuers rushed to bring securities to market in anticipation of additional interest rate increases in the near term. From a credit perspective, the state of California has made some positive strides. The California government's measures to stem current and projected budget deficits have been met with broad approval by investors. This in turn has resulted in improved demand for California bonds and a general rise in bond prices. During the period, the state maintained its position as the leading issuer of new municipal debt. More than half of the new issuance which came to market was protected by credit insurance, which was helpful for us as we attempted to put cash to work. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The fund returned 1.08 percent for the six months ended March 31, 2005 (Class A shares, unadjusted for sales charge). In comparison, the fund's benchmark index, the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period. TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
------------------------------------------------------------------------------ LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 1.08% 1.08% 0.71% 1.21% ------------------------------------------------------------------------------
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND INDEX DEFINITIONS. The fund's performance relative to its benchmark was in large part the result of its positioning along the yield curve. One of our primary strategies in managing the fund was to take advantage of compelling opportunities in the 25- to 30-year segment of the market. We focused here on purchasing securities with premium (that is, above-market) coupons and moderate interest rate sensitivity. While we believe these securities offer strong total return potential, they did boost the fund's exposure during the period to a segment of the California market which underperformed relative to the broader, national benchmark. Our purchases of these securities were funded by the proceeds of sales of several shorter-maturity positions, many of which had been refunded during the period. This was part of our ongoing strategy of positioning the fund for an environment of rising short-term interest rates by limiting the fund's exposure to that segment of the market. In terms of purchases, we continued to favor the essential services segments of the market, such as education and transportation. In turn, we avoided the housing sector out of concerns about those bonds' structural characteristics. We also avoided zero coupon bonds. This approach resulted in a portfolio that remained well diversified across the major segments of the California municipal bond market. Tax districts, public education, higher education, public building and general purpose represented the portfolio's top exposures. Because the fund focuses on bonds that offer the credit enhancement of insurance, the entire portfolio was rated AAA at the close of the period. There is no guarantee the security sectors mentioned will continue to perform well or be held by the fund in the future. 3 RATINGS ALLOCATIONS AS OF 3/31/05 TOP 5 SECTORS AS OF 3/31/05 AAA/Aaa 100% Tax District 21.8% Public Education 18.9 Higher Education 13.6 Public Building 13.4 General Purpose 12.3
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the industries shown above. Ratings allocations is as a percentage of total investments. Top 5 sectors percentages are as a percentage of long-term investments. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Ratings allocations based upon ratings as issued by Standard & Poor's and Moody's, respectively. 4 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. 5 PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities and information on how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov 6 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction cost, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales charge on redemptions of Class B and C Shares; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/01/04 - 03/31/05. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, and $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* ------------------------------------------------- 10/1/04 3/31/05 10/1/04-3/31/05 Class A Actual..................................... $1,000.00 $1,010.79 $ 4.51 Hypothetical............................... 1,000.00 1,020.43 4.53 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,010.75 4.56 Hypothetical............................... 1,000.00 1,021.03 4.58 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,007.07 7.76 Hypothetical............................... 1,000.00 1,017.23 7.80 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, 0.91%, and 1.55% for Class A, B, and C Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 7 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS 100.3% $1,925 Alhambra, CA City Elem Sch Dist Cap Apprec Ser A (FSA Insd) (a).................................. * 09/01/20 $ 903,787 1,000 Anaheim, CA Pub Fin Auth Rev Elec Sys Generation Ser B Rfdg (FSA Insd)........................... 5.000% 10/01/16 1,060,590 2,000 Anaheim, CA Pub Fin Auth Tax Alloc Rev (MBIA Insd) (b)....................................... 11.021 12/28/18 2,421,440 1,430 Bay Area Govt Assn CA Lease Rev Cap Proj Ser A (AMBAC Insd) (a)................................ 5.250 07/01/17 1,543,356 2,735 Bay Area Govt Assn CA Lease West Sacramento Ser A (XLCA Insd) (a)............................... 5.000 09/01/29 2,801,980 1,070 Bonita, CA Uni Sch Dist Election 2004 Ser A (MBIA Insd)..................................... 5.250 08/01/24 1,141,893 1,000 Bonita, CA Uni Sch Dist Election 2004 Ser A (MBIA Insd)..................................... 5.000 08/01/28 1,038,860 1,730 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA Insd) (a)....................................... 5.500 08/01/17 1,902,879 1,850 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA Insd) (a)....................................... 5.500 08/01/18 2,030,708 455 Calexico, CA Cmnty Redev Agy Tax Alloc Merged Cent Bus & Residential Ser C (AMBAC Insd)....... 5.000 08/01/28 470,374 7,000 California Edl Fac Auth Rev Univ Of The Pacific (MBIA Insd)..................................... 5.875 11/01/20 7,780,080 2,000 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien Ser A (FGIC Insd).... 5.000 07/01/29 2,068,840 1,050 California Spl Dist Assn Fin Corp Ctf Part Pgm Ser DD (FSA Insd) (a)........................... 5.625 01/01/27 1,108,180 1,250 California St (FGIC Insd)....................... 6.250 09/01/12 1,456,375 2,385 California St (XLCA Insd) (a)................... 6.250 09/01/12 2,768,675 1,200 California St Dept Trans Ctf Ser A Rfdg (MBIA Insd)........................................... 5.250 03/01/16 1,269,252 2,000 California St Dept Vet Affairs Ser A (AMBAC Insd)........................................... 5.300 12/01/21 2,088,060 1,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.500 05/01/16 1,106,490 1,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.375 05/01/18 1,086,320 2,500 California St Dept Wtr Res Pwr Supply Rev Rite Ser B (MBIA Insd) (Acquired 09/08/03, Cost $2,676,175) (a) (b) (c)......................... 7.816 05/01/11 2,925,450 2,500 California St Pub Wks Brd Lease Dept Corrections Ten Admin Ser A (AMBAC Insd).................... 5.250 03/01/17 2,661,475 4,125 California St Pub Wks Brd Lease Rev CA St Univ Ser A Rfdg (AMBAC Insd) (a)..................... 5.500 10/01/14 4,365,034 7,750 California St Rfdg (FGIC Insd).................. 5.000 02/01/23 8,014,662 1,000 California St Univ Rev & Colleges Systemwide Ser A (AMBAC Insd).................................. 5.375 11/01/18 1,090,920
8 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $1,000 California St Univ Rev Systemwise Ser A (AMBAC Insd) (d)....................................... 5.000% 11/01/28 $ 1,041,370 1,000 Carson, CA Redev Agy Redev Proj Area No 1 Tax Alloc (MBIA Insd)............................... 5.500 10/01/15 1,121,200 2,000 Castaic Lake Wtr Agy CA Ctf Part Wtr Sys Impt Proj Ser A Rfdg (MBIA Insd)..................... 7.000 08/01/12 2,421,800 3,000 Castaic Lake Wtr Agy CA Rev Ctf Part Ser A (MBIA Insd)........................................... 5.250 08/01/23 3,178,140 1,415 Cerritos, CA Cmnty College Election 2004 Ser A (MBIA Insd)..................................... 5.000 08/01/26 1,468,897 1,735 Cerritos, CA Cmnty College Election 2004 Ser A (MBIA Insd)..................................... 5.000 08/01/28 1,797,061 1,205 Channel Islands Beach, CA Cmnty Svcs Dist Ctf Part CA Spl Dist Fin Proj BB (FSA Insd) (a)..... 5.700 09/01/21 1,295,929 1,160 Coachella, CA Fin Auth Tax Proj 1 & 2 Ser A Rfdg (XLCA Insd) (a)................................. 5.250 12/01/30 1,222,396 3,400 Contra Costa, CA Cmnty College Election 2002 (MBIA Insd)..................................... 5.000 08/01/29 3,529,506 1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA Insd)........................................... 5.000 06/01/21 1,041,690 1,300 Folsom Cordova, CA Uni Sch Dist Sch Fac Impt Dist No 2 Ser A (MBIA Insd)..................... 5.375 10/01/17 1,421,160 1,360 Folsom, CA Pub Fin Auth City Hall & Cmnty Ctr Rfdg (FSA Insd) (a)............................. 5.000 10/01/16 1,449,814 1,480 Fontana, CA Redev Agy Tax Alloc Dwntwn Redev Proj Rfdg (MBIA Insd)........................... 5.000 09/01/21 1,528,381 1,040 Fontana, CA Uni Sch Dist Rfdg (MBIA Insd)....... 5.250 05/01/20 1,119,685 1,850 Franklin McKinley CA Sch Dist Election 2004 Ser A (FGIC Insd) (d)............................... 5.000 08/01/29 1,905,426 650 Fresno, CA Jt Pwrs Fin Auth Ser A (FSA Insd).... 5.000 06/01/17 686,666 590 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/17 692,153 630 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/18 741,491 675 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/19 797,026 720 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/20 853,243 2,000 Glendale, CA Redev Agy Tax Ctr Glendale Redev Proj (MBIA Insd)................................ 5.250 12/01/20 2,140,680 2,425 Glendora, CA Pub Fin Auth Tax Alloc Proj No 1 Ser A (MBIA Insd)............................... 5.000 09/01/24 2,511,669 1,750 Hacienda La Puente, CA Uni Sch Dist Ser A (MBIA Insd)........................................... 5.500 08/01/20 1,909,547 2,230 Hanford, CA High Sch Dist Election 1998 Ser C (MBIA Insd) (a)................................. 5.700 08/01/28 2,486,851
See Notes to Financial Statements 9 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $1,250 Hemet, CA Uni Sch Dist Ctf Part Nutrition Ctr Proj (FSA Insd)................................. 5.875% 04/01/27 $ 1,333,588 2,500 Huntington Beach, CA High Election 2004 (FSA Insd)........................................... 5.000 08/01/26 2,602,975 2,000 Imperial Irr Dist CA Ctf Part Elec Sys Proj (FSA Insd)........................................... 5.250 11/01/23 2,119,620 1,950 Imperial Irr Dist CA Ctf Part Wtr Sys Proj (AMBAC Insd) (a)................................ 5.000 07/01/19 2,037,575 2,000 Inglewood, CA Redev Agy Tax Alloc Merged Redev Proj Ser A Rfdg (AMBAC Insd).................... 5.250 05/01/23 2,199,080 1,715 Irvine, CA Pub Fac & Infrastructure Ser B (AMBAC Insd) (a)....................................... 5.000 09/02/23 1,773,722 2,000 La Canada, CA Uni Sch Dist Election 2004 Ser A (MBIA Insd)..................................... 5.500 08/01/28 2,188,420 2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.250 09/01/24 2,130,620 2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.000 09/01/29 2,070,560 2,000 La Quinta, CA Redev Agy Tax Alloc Redev Proj Area No 1 (AMBAC Insd).......................... 5.000 09/01/22 2,089,280 1,000 Livermore-Amador Vly Wtr Mgmt Agy CA Swr Rev Ser A (AMBAC Insd).................................. 5.250 08/01/16 1,083,520 1,500 Long Beach Ca Bd Fin Auth Rev Redev Hsg & Gas Util Fing A 1 (AMBAC Insd)...................... 5.000 08/01/35 1,539,495 1,000 Long Beach, CA Bd Fin Auth Lease Rev Rainbow Harbor Refin Proj Ser A (AMBAC Insd)............ 5.250 05/01/24 1,063,030 1,260 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac Proj (AMBAC Insd) (a)........................... 5.250 11/01/16 1,370,263 1,545 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac Proj (AMBAC Insd) (a)........................... 5.250 11/01/20 1,654,340 2,740 Los Angeles Cnty, CA Ctf Part Antelope Vly Courthouse Ser A (AMBAC Insd)................... 5.750 11/01/16 3,033,290 1,000 Los Angeles Cnty, CA Ctf Part Disney Pkg Proj Rfdg (AMBAC Insd)............................... 4.750 03/01/23 1,005,420 1,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop A First Tier Sr Ser C Rfdg (AMBAC Insd).... 5.000 07/01/23 1,034,900 1,235 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop C Second Tier Sr Ser A Rfdg (FGIC Insd).... 5.000 07/01/15 1,312,570 1,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop C Second Tier Sr Ser A Rfdg (FGIC Insd).... 5.000 07/01/16 1,061,240 1,265 Los Angeles Cnty, CA Schs Regionalized Business Svcs Ctf Partn Cap Apprec Pooled Fin Ser A (AMBAC Insd).................................... * 08/01/24 465,798 237 Los Angeles Cnty, CA Tran Comm Lease Rev RR Lease Ltd (FSA Insd)............................ 7.375 12/15/06 239,387 3,000 Los Angeles, CA Cmnty College Election 2001 Ser A Rfdg (FSA Insd)............................... 5.000 08/01/25 3,139,110 1,975 Los Angeles, CA Ctf Part Real Ppty Pgm Ser T (MBIA Insd) (a)................................. 5.000 02/01/19 2,061,347
10 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $2,000 Los Angeles, CA Dept Wtr & Pwr Sys Ser C (MBIA Insd)........................................... 5.000% 07/01/26 $ 2,067,960 2,380 Los Angeles, CA Mtg Rev FHA Security 8 Asstd Proj Ser A Rfdg (MBIA Insd)..................... 6.100 07/01/25 2,386,831 1,375 Los Angeles, CA Spl Assmt Landscaping & Ltg Dist No 96 Ser 1 (AMBAC Insd) (a).................... 5.000 03/01/21 1,425,765 1,000 Lynwood, CA Uni Sch Dist 2002 Election Ser A (FSA Insd)...................................... 5.000 08/01/27 1,036,120 1,500 Modesto, CA Irr Dist Ctf Part Cap Impts Ser A (FSA Insd)...................................... 5.250 07/01/18 1,610,415 1,105 Monrovia, CA Fin Auth Lease Rev Hillside Wilderness Preserve (AMBAC Insd)................ 5.000 12/01/20 1,165,145 2,000 Montclair, CA Redev Agy Tax Redev Proj No V Rfdg (MBIA Insd)..................................... 5.000 10/01/20 2,082,440 1,000 Mount Pleasant, CA Elem Sch Dist 1998 Election Ser C (FSA Insd)................................ 5.500 03/01/26 1,081,760 1,570 Mountain View, CA Shoreline Tax Alloc Ser A (MBIA Insd) (a)................................. 5.250 08/01/16 1,702,806 370 M-S-R Pub Pwr Agy CA San Juan Proj Rev Adj Sub Lien Ser E (MBIA Insd).......................... 6.000 07/01/22 375,624 1,105 National City, CA Cmnty Dev Com Redev Proj Ser B Rfdg (AMBAC Insd)............................... 5.250 08/01/32 1,168,670 2,000 Natomas, CA Uni Sch Dist Rfdg (FGIC Insd)....... 5.250 09/01/16 2,157,640 1,250 North City West, CA Sch Fac Fin Auth Spl Tax Ser B Rfdg (FSA Insd)............................... 5.750 09/01/15 1,324,288 2,000 North Orange Cnty, CA Cmnty Rfdg (MBIA Insd) (d)............................................. 5.000 08/01/23 2,101,200 1,000 Novato, CA Uni Sch Dist (FSA Insd) (d).......... 5.000 08/01/28 1,038,860 3,915 Oak Grove, CA Sch Dist 1995 Election (FGIC Insd)........................................... 5.250 08/01/25 4,141,052 1,000 Oakland, CA Uni Sch Dist Alameda Cnty (FSA Insd)........................................... 5.000 08/01/17 1,046,710 1,300 Oceanside, CA Ctf Part Ser A Rfdg (AMBAC Insd)........................................... 5.200 04/01/23 1,367,613 1,930 Ontario, CA Redev Fin Auth Rev Proj No 1 Ctr City & Cimarron (MBIA Insd)..................... 5.250 08/01/15 2,091,097 3,025 Orange Cnty, CA Pub Fin Auth Lease Rev Juvenile Justice Ctr Fac Rfdg (AMBAC Insd)............... 5.375 06/01/17 3,299,428 5,000 Orange Cnty, CA Recovery Ctf Part Ser A (MBIA Insd)........................................... 5.800 07/01/16 5,279,000 1,145 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd)..... 5.000 10/01/25 1,189,312 1,340 Palm Springs, CA Fin Lease Rev Convention Ctr Proj Ser A Rfdg (MBIA Insd)..................... 5.250 11/01/19 1,439,616 2,500 Perris, CA Uni High Sch Dist Ser A (FGIC Insd)........................................... 5.000 09/01/26 2,604,000 2,020 Pomona, CA Pub Fin Auth Rev Merged Redev Proj Ser AD (MBIA Insd) (a).......................... 5.000 02/01/15 2,139,685 1,110 Pomona, CA Pub Fin Auth Rev Merged Redev Proj Ser AD (MBIA Insd) (a).......................... 5.000 02/01/16 1,175,768
See Notes to Financial Statements 11 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $1,360 Port Hueneme, CA Ctf Part Cap Impt Pgm Rfdg (MBIA Insd)..................................... 6.000% 04/01/19 $ 1,606,813 1,055 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj (AMBAC Insd) (a)................................ 5.375 06/15/20 1,137,723 3,000 Rancho Cucamonga, CA Redev Agy Rancho Redev Proj (MBIA Insd)..................................... 5.375 09/01/25 3,193,920 1,680 Rancho, CA Wtr Dist Spl Tax Cmnty Fac Dist 883 Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/17 1,735,843 1,000 Redding, CA Elec Sys Rev Ctf Part (Escrowed to Maturity) (MBIA Insd) (b)....................... 10.546 07/01/22 1,425,630 1,400 Redding, CA Redev Agy Tax Alloc Canby Hilltop Cypress Redev Ser A (MBIA Insd)................. 5.000 09/01/23 1,462,104 2,000 Rialto, CA Spl Tax Cmnty Fac Dist 87-1 Rfdg (FSA Insd)........................................... 5.625 09/01/18 2,111,960 1,000 Riverside Cnty, CA Ctf Part Historic Courthouse Proj (MBIA Insd)................................ 5.875 11/01/27 1,079,010 1,310 Rowland, CA Uni Sch Dist Ser A (FSA Insd)....... 5.500 09/01/20 1,430,821 1,000 Sacramento, CA City Fin Auth Rev Cap Impt (AMBAC Insd)........................................... 5.000 12/01/33 1,024,310 1,500 San Diego Cnty, CA Ctf Part Edgemoor Proj & Regl Sys Rfdg (AMBAC Insd)........................... 5.000 02/01/23 1,564,425 1,500 San Francisco, CA City & Cnty Redev Fin Auth Tax Alloc San Francisco Redev Proj Ser A (FSA Insd)........................................... 5.000 08/01/15 1,570,170 2,000 San Francisco, CA City & Cnty Second Ser Issue 26B (FGIC Insd)................................. 5.000 05/01/22 2,070,080 1,000 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd)..... 5.375 03/01/17 1,089,330 2,675 San Jose, CA Fin Auth Lease Rev Convention Ctr Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,823,115 1,000 San Leandro, CA Ctf Part Lib & Fire Stations Fin (AMBAC Insd).................................... 5.750 11/01/29 1,104,890 1,000 San Leandro, CA Jt Proj Area Fin (MBIA Insd).... 5.100 12/01/26 1,036,580 1,460 San Marcos, CA Redev Agy Tax Alloc (FSA Insd)... 5.375 08/01/25 1,553,659 1,340 Sanger, CA Uni Sch Dist Ctf Cap Impt Prog (FSA Insd) (a)....................................... 5.000 03/01/25 1,380,602 2,000 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc Ser A Rfdg (MBIA Insd) (a)...................... 5.375 09/01/20 2,149,220 2,065 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/21 2,219,070 2,450 Santa Monica, CA Cmnty College Ser A Rfdg (AMBAC Insd) (a)....................................... 5.250 02/01/23 2,599,989 1,000 Shasta, CA Jt Pwrs Fin Auth Cnty Admin Bldg Proj Ser A (MBIA Insd)............................... 5.250 04/01/22 1,058,530 1,000 South Gate, CA Pub Fin Auth South Gate Redev Proj No 1 (XLCA Insd)........................... 5.750 09/01/22 1,117,660 2,750 Southern CA Pub Pwr Transmission Rev Southn Transmission Sub Ser A Rfdg (FSA Insd).......... 5.250 07/01/16 2,981,413 1,195 Sweetwater, CA Auth Wtr Rev (FSA Insd).......... 5.250 04/01/16 1,289,931
12 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $2,150 Temecula, CA Redev Agy Tax Alloc Rev Temecula Redev Proj No 1 (MBIA Insd)..................... 5.125% 08/01/27 $ 2,202,396 1,000 University of CA Rev Multi Purp Proj Ser F (FGIC Insd)........................................... 5.000 09/01/16 1,035,800 1,000 University of CA Rev Multi Purp Proj Ser M (FGIC Insd)........................................... 5.125 09/01/17 1,068,830 1,000 University of CA Rev Resh Fac Ser E (AMBAC Insd)........................................... 5.000 09/01/19 1,049,270 1,540 Vallejo City, CA Uni Sch Dist Ser A Rfdg (MBIA Insd)........................................... 5.900 02/01/20 1,814,567 2,000 Ventura Cnty, CA Ctf Part Pub Fin Auth Ser I (FSA Insd)...................................... 5.250 08/15/16 2,141,080 ------------ TOTAL LONG-TERM INVESTMENTS 100.3% (Cost $222,990,266)....................................................... 235,704,157 SHORT-TERM INVESTMENTS 1.5% (Cost $3,615,000)......................................................... 3,615,000 ------------ TOTAL INVESTMENTS 101.8% (Cost $226,605,266)....................................................... 239,319,157 LIABILITIES IN EXCESS OF OTHER ASSETS (1.8%)............................... (4,203,754) ------------ NET ASSETS 100.0%.......................................................... $235,115,403 ============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) The Fund owns 100% of the bond issuance. (b) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. (c) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 1.24% of net assets. (d) Security purchased on a when-issued or delayed delivery basis. See Notes to Financial Statements 13 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. 14 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2005 (Unaudited) ASSETS: Total Investments (Cost $226,605,266)....................... $239,319,157 Cash........................................................ 73,425 Receivables: Interest.................................................. 2,597,102 Fund Shares Sold.......................................... 329,515 Other....................................................... 129,521 ------------ Total Assets............................................ 242,448,720 ------------ LIABILITIES: Payables: Investments Purchased..................................... 6,079,743 Fund Shares Repurchased................................... 505,932 Income Distributions...................................... 223,692 Distributor and Affiliates................................ 172,242 Investment Advisory Fee................................... 94,584 Trustees' Deferred Compensation and Retirement Plans........ 190,644 Accrued Expenses............................................ 66,480 ------------ Total Liabilities....................................... 7,333,317 ------------ NET ASSETS.................................................. $235,115,403 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $220,589,447 Net Unrealized Appreciation................................. 12,713,891 Accumulated Net Realized Gain............................... 1,111,055 Accumulated Undistributed Net Investment Income............. 701,010 ------------ NET ASSETS.................................................. $235,115,403 ============ NET ASSET VALUE PER COMMON SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $186,356,817 and 10,000,321 shares of beneficial interest issued and outstanding)............. $ 18.64 Maximum sales charge (3.25%* of offering price)......... .63 ------------ Maximum offering price to public........................ $ 19.27 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $37,397,036 and 1,989,061 shares of beneficial interest issued and outstanding)............. $ 18.80 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $11,361,550 and 609,487 shares of beneficial interest issued and outstanding)............. $ 18.64 ============
* On sales of $25,000 or more, the sales charge will be reduced. See Notes to Financial Statements 15 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2005 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 5,647,637 ----------- EXPENSES: Investment Advisory Fee..................................... 556,160 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $228,529, $50,234 and $52,730, respectively)............................................. 331,493 Shareholder Services........................................ 70,756 Legal....................................................... 23,550 Trustees' Fees and Related Expenses......................... 12,749 Custody..................................................... 10,054 Other....................................................... 102,866 ----------- Total Expenses.......................................... 1,107,628 Less Credits Earned on Cash Balances.................... 1,583 ----------- Net Expenses............................................ 1,106,045 ----------- NET INVESTMENT INCOME....................................... $ 4,541,592 =========== REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain........................................... $ 1,149,501 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 16,035,924 End of the Period......................................... 12,713,891 ----------- Net Unrealized Depreciation During the Period............... (3,322,033) ----------- NET REALIZED AND UNREALIZED LOSS............................ $(2,172,532) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 2,369,060 ===========
16 See Notes to Financial Statements 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, 2005 SEPTEMBER 30, 2004 ------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 4,541,592 $ 9,754,874 Net Realized Gain...................................... 1,149,501 1,219,512 Net Unrealized Depreciation During the Period.......... (3,322,033) (811,824) ------------ ------------ Change in Net Assets from Operations................... 2,369,060 10,162,562 ------------ ------------ Distributions from Net Investment Income: Class A Shares....................................... (3,633,687) (7,229,603) Class B Shares....................................... (629,669) (1,397,557) Class C Shares....................................... (190,141) (466,320) ------------ ------------ (4,453,497) (9,093,480) ------------ ------------ Distributions from Net Realized Gain: Class A Shares....................................... (1,194,255) -0- Class B Shares....................................... (256,541) -0- Class C Shares....................................... (76,525) -0- ------------ ------------ (1,527,321) -0- ------------ ------------ Total Distributions.................................... (5,980,818) (9,093,480) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (3,611,758) 1,069,082 ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold.............................. 15,226,868 29,982,107 Net Asset Value of Shares Issued Through Dividend Reinvestment......................................... 4,268,217 6,394,383 Cost of Shares Repurchased............................. (17,427,359) (64,008,093) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... 2,067,726 (27,631,603) ------------ ------------ TOTAL DECREASE IN NET ASSETS........................... (1,544,032) (26,562,521) NET ASSETS: Beginning of the Period................................ 236,659,435 263,221,956 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $701,010 and $612,915, respectively)........................................ $235,115,403 $236,659,435 ============ ============
See Notes to Financial Statements 17 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (c) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $18.93 $18.84 $19.45 $18.64 $17.67 $17.28 ------ ------ ------ ------ ------ ------ Net Investment Income......... .36 .75 .74 .77 .81 .82 Net Realized and Unrealized Gain/Loss................... (.16) .06 (.44) .85 .94 .38 ------ ------ ------ ------ ------ ------ Total from Investment Operations.................... .20 .81 .30 1.62 1.75 1.20 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income........... .37 .72 .75 .78 .78 .81 Distributions from Net Realized Gain............... .12 -0- .16 .03 -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions............. .49 .72 .91 .81 .78 .81 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................ $18.64 $18.93 $18.84 $19.45 $18.64 $17.67 ====== ====== ====== ====== ====== ====== Total Return (a)................ 1.08%* 4.42% 1.67% 9.01% 10.09% 7.20% Net Assets at End of the Period (In millions)................. $186.4 $183.0 $195.4 $200.4 $174.9 $152.5 Ratio of Expenses to Average Net Assets (b).................... .90% .89% .87% .87% .89% .98% Ratio of Net Investment Income to Average Net Assets......... 3.88% 4.00% 3.93% 4.18% 4.43% 4.79% Portfolio Turnover.............. 7%* 16% 25% 32% 39% 52%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 3.25% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchases. With respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended September 30, 2000. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 4.16% to 4.18%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. 18 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ---------------------------------------------------- 2005 2004 2003 2002 (c) 2001 2000 ------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $19.03 $18.82 $19.44 $18.65 $17.69 $17.26 ------ ------ ------ ------ ------ ------ Net Investment Income.......... .37 .72 .60 .63 .67 .68 Net Realized and Unrealized Gain/Loss.................... (.18) .07 (.45) .84 .94 .43 ------ ------ ------ ------ ------ ------ Total from Investment Operations..................... .19 .79 .15 1.47 1.61 1.11 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............ .30 .58 .61 .65 .65 .68 Distributions from Net Realized Gain......................... .12 -0- .16 .03 -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions.............. .42 .58 .77 .68 .65 .68 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD......................... $18.80 $19.03 $18.82 $19.44 $18.65 $17.69 ====== ====== ====== ====== ====== ====== Total Return (a)................. 1.08%*(d) 4.29%(d) 0.87% 8.16% 9.27% 6.63% Net Assets at End of the Period (In millions).................. $ 37.4 $ 41.1 $ 49.8 $ 53.0 $ 47.7 $ 38.3 Ratio of Expenses to Average Net Assets (b)..................... .91%(d) 1.09%(d) 1.62% 1.63% 1.65% 1.74% Ratio of Net Investment Income to Average Net Assets............. 3.88%(d) 3.80%(d) 3.18% 3.42% 3.67% 4.03% Portfolio Turnover............... 7%* 16% 25% 32% 39% 52%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 3%, charged on certain redemptions made within one year of purchase and declining to 0% after the fourth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on the Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended September 30, 2000. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 3.40% to 3.42%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See footnote 5). See Notes to Financial Statements 19 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, -------------------------------------------------- 2005 2004 2003 2002 (c) 2001 2000 ---------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $18.93 $18.82 $19.43 $18.64 $17.68 $17.26 ------ ------ ------ ------ ------ ------ Net Investment Income........... .30 .61 .61 .64 .68 .68 Net Realized and Unrealized Gain/Loss..................... (.17) .08 (.45) .83 .93 .42 ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .13 .69 .16 1.47 1.61 1.10 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............. .30 .58 .61 .65 .65 .68 Distributions from Net Realized Gain.......................... .12 -0- .16 .03 -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions............... .42 .58 .77 .68 .65 .68 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $18.64 $18.93 $18.82 $19.43 $18.64 $17.68 ====== ====== ====== ====== ====== ====== Total Return (a).................. 0.71%*(e) 3.75%(e) 0.92%(d) 8.16% 9.27% 6.57% Net Assets at End of the Period (In millions)................... $ 11.4 $ 12.6 $ 18.1 $ 15.0 $ 11.0 $ 6.6 Ratio of Expenses to Average Net Assets (b)...................... 1.55%(e) 1.59%(e) 1.62% 1.63% 1.65% 1.74% Ratio of Net Investment Income to Average Net Assets.............. 3.24%(e) 3.30%(e) 3.20%(d) 3.41% 3.67% 4.03% Portfolio Turnover................ 7%* 16% 25% 32% 39% 52%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1% charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended September 30, 2000. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets from 3.39% to 3.41%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (d) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .03%. (e) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See footnote 5). 20 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen California Insured Tax Free Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide only California investors with a high level of current income exempt from federal and California income taxes, with liquidity and safety of principal, primarily through investment in a diversified portfolio of insured California municipal securities. The Fund commenced investment operations on December 13, 1985. The distribution of the Fund's Class B Shares and Class C Shares commenced on April 30, 1993 and August 13, 1993, respectively. The Fund registered Class I Shares on September 1, 2004. There were no sales of Class I Shares for the period ended March 31, 2005. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2005, the Fund had $6,079,743 of when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies 21 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. At March 31, 2005, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $226,456,917 ============ Gross tax unrealized appreciation........................... $ 13,036,211 Gross tax unrealized depreciation........................... (173,971) ------------ Net tax unrealized appreciation on investments.............. $ 12,862,240 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains and a portion of futures gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2004 was as follows: Distributions paid from: Ordinary income........................................... $6,710 Long-term capital gain.................................... -0- ------ $6,710 ======
As of September 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 543 Undistributed long-term capital gain........................ 1,481,141
F. INSURANCE EXPENSE The Fund typically invests in insured bonds. Any portfolio securities not specifically covered by a primary insurance policy are insured secondarily through the Fund's portfolio insurance policy. Insurance premiums are based on the daily balances of uninsured bonds in the portfolio of investments and are charged to expense on an accrual basis. The insurance policy guarantees the timely payment of principal and interest on the securities in the Fund's portfolio. G. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's custody fee was reduced by $1,583 as a result of credits earned on cash balances. 22 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $100 million.......................................... 0.500 Next $150 million........................................... 0.450 Next $250 million........................................... 0.425 Over $500 million........................................... 0.400
For the six months ended March 31, 2005, the Fund recognized expenses of approximately $8,500 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Accounting Services and Legal Services Agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $26,300 representing Van Kampen Investment Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $54,300 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are also officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $112,160 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2005. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 23 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2005, capital aggregated $172,941,063, $36,078,739 and $11,569,645 for Classes A, B and C, respectively. For the six months ended March 31, 2005, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 712,878 $ 13,514,922 Class B................................................... 42,057 803,145 Class C................................................... 47,941 908,801 -------- ------------ Total Sales................................................. 802,876 $ 15,226,868 ======== ============ Dividend Reinvestment: Class A................................................... 183,473 $ 3,466,348 Class B................................................... 33,396 635,853 Class C................................................... 8,784 166,016 -------- ------------ Total Dividend Reinvestment................................. 225,653 $ 4,268,217 ======== ============ Repurchases: Class A................................................... (561,775) $(10,637,366) Class B................................................... (244,141) (4,658,724) Class C................................................... (112,327) (2,131,269) -------- ------------ Total Repurchases........................................... (918,243) $(17,427,359) ======== ============
At September 30, 2004, capital aggregated $166,597,159, $39,298,465 and $12,626,097 for Classes A, B and C, respectively. For the year ended September 30, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,321,299 $ 24,855,999 Class B................................................... 171,104 3,223,210 Class C................................................... 100,371 1,902,898 ---------- ------------ Total Sales................................................. 1,592,774 $ 29,982,107 ========== ============ Dividend Reinvestment: Class A................................................... 273,238 $ 5,131,435 Class B................................................... 51,748 973,315 Class C................................................... 15,415 289,633 ---------- ------------ Total Dividend Reinvestment................................. 340,401 $ 6,394,383 ========== ============ Repurchases: Class A................................................... (2,300,593) $(42,956,763) Class B................................................... (711,747) (13,334,011) Class C................................................... (409,940) (7,717,319) ---------- ------------ Total Repurchases........................................... (3,422,280) $(64,008,093) ========== ============
24 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996 and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2005 and the year ended September 30, 2004, 46,522 and 28,194 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2005 and the year ended September 30, 2004, 103,741 and 0 Class C Shares converted to Class A Shares, respectively and are shown in the above table as sales of Class A Shares and repurchases of Class B Shares. Classes B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed on most redemptions made within four years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
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
Class B Shares purchased on or after June 1, 2005 are subject to the following CDSC schedule:
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE YEAR SINCE PURCHASE ------------------- First....................................................... 4.00% Second...................................................... 4.00% Third....................................................... 3.00% Fourth...................................................... 2.50% Fifth....................................................... 1.50% Sixth and After............................................. 0.00%
25 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued For the six months ended March 31, 2005, Van Kampen as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $18,800 and CDSC on redeemed shares of approximately $15,700. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $20,468,005 and $16,831,226, respectively. 5. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. At March 31, 2005, there were no distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") for Class B and Class C Shares. Any unreimbursed receivables may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2005 are payments retained by Van Kampen of approximately $19,400 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $23,100. 6. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of the 26 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Van Kampen funds; the named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of proprietary mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with the consolidated complaint described in the preceding paragraph. Plaintiff has sought leave to file a second amended derivative compliant that alleges that the Adviser permitted or recklessly disregarded market timing and late trading in its proprietary mutual funds in order to increase assets under management and fees. However, pursuant to an agreement between the parties, that plaintiff's proposed second amended derivative complaint was withdrawn and the allegations regarding market timing and late trading asserted therein were filed in a separate complaint and coordinated with other cases related to market timing that have been centralized in a federal court. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 7. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 27 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* - President and Chief Executive Officer JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 28 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 41 341, 541 CAI SAR 5/05 RN05-01060P-Y03/05 (VAN KAMPEN INVESTMENTS LOGO) Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Municipal Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2005. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/05
A SHARES B SHARES C SHARES since 8/01/90 since 8/24/92 since 8/13/93 --------------------------------------------------------------------------------------------- AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES Since Inception 6.00% 5.65% 4.73% 4.73% 3.91% 3.91% 10-year 5.00 4.49 4.52 4.52 4.20 4.20 5-year 5.55 4.54 4.75 4.50 4.75 4.75 1-year 1.96 -2.91 1.20 -2.70 1.21 0.23 6-month 0.63 -4.15 0.26 -3.67 0.27 -0.72 --------------------------------------------------------------------------------------------- 30-Day SEC Yield 3.23% 2.64% 2.65%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares six years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005 Van Kampen Municipal Income Fund is managed by the Adviser's Municipal Fixed Income team.(1) Current members of the team include James F. Willison, Managing Director of the Adviser; Joseph R. Arcieri, Executive Director of the Adviser; and Timothy D. Haney, Vice President of the Adviser. MARKET CONDITIONS The six-month period ended March 31, 2005, was characterized by continued short-term interest rate increases, and the specter of rising inflation resulting from record-high crude oil prices. The Federal Open Market Committee (the "Fed") raised the federal funds target rate 100 basis points during the period through a series of four, "measured" 0.25 percent tightenings to 2.75 percent by the end of March. Although rates in the short and intermediate areas of the yield curve shifted upward as the Fed tightened, long-term interest rates fell as buyers did not seem deterred by the prospect of rising inflation. As a result, the yield curve (the difference between short and longer-term yields) flattened and the long end of the municipal market handily outperformed the shorter end. The municipal market in total posted positive returns during the period, though it was not uniformly strong. In contrast to the strong showing by longer-term bonds, shorter-term municipals were hampered by the Fed's tightening and turned in a slightly negative showing. Within the investment-grade segment of the market, yield differentials between BBB-rated municipals and AAA-rated securities were flat to slightly wider, though BBB-rated securities still outperformed high grades due to their higher coupons, while securities rated below investment grade strongly outperformed as investors sought out their higher yields. The Fed's interest rate hikes did not dampen investors' appetites for municipal bonds, as net inflows into municipal bond funds topped $700 million during the period. The supply of new issues was modest during the closing months of 2004 (the first half of the period) before soaring in the opening months of 2005 as long-term issuers rushed to bring securities to market in anticipation of additional interest rate increases in the near term. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The fund returned 0.63 percent for the six months ended March 31, 2005 (Class A shares, unadjusted for sales charge). In comparison, the fund's benchmark index, Lehman Brothers Municipal Bond Index returned 1.21 percent for the period. TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
-------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 0.63% 0.26% 0.27% 1.21% --------------------------------------------------------------
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND INDEX DEFINITION. The fund's underperformance relative to its benchmark was largely the result of its exposure to bonds with maturities in the five- to 10-year range. These securities were especially hard hit by rising interest rates during the period, and the fund's above-market exposure meant that it suffered more than did the broader market benchmark from their poor performance. We trimmed many of these holdings as part of an ongoing strategy to position the fund for continued increases in short-term interest rates. This strategy also included adding selectively to the fund's holdings of bonds with longer maturities but moderate interest rate characteristics. Finally, we kept the fund's duration (a measure of overall interest-rate sensitivity) below that of its benchmark. We continued to focus on relative-value trading between liquid, high-quality securities to capture relative value opportunities identified by our analysts. The fund's overall credit exposure remained tilted toward higher-quality securities, with more than 81 percent of its exposure at the end of the period in bonds rated AA or better. That said, the portfolio also had approximately 14 percent of its exposure in bonds rated BBB or lower. These positions benefited from the ongoing outperformance by lower-rated bonds, and were beneficial to the fund's returns. The fund's portfolio remained well diversified across the major sectors of the municipal bond market, with its top three sectors at the end of the period being general purpose, transportation and wholesale electric. There is no guarantee the security sectors mentioned will continue to perform well or be held by the fund in the future. 3
RATINGS ALLOCATIONS AS OF 3/31/05 AAA 68.5% AA 13.0 A 5.0 BBB 4.8 BB 0.9 B 0.3 NR 7.5 TOP 5 SECTORS AS OF 3/31/05 General Purpose 17.6% Transportation 11.7 Wholesale Electric 10.4 Public Education 10.3 Water & Sewer 9.1 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05 New York 15.6% California 12.8 Texas 8.4 Illinois 8.1 New Jersey 7.9 Colorado 6.0 Florida 5.9 Michigan 3.9 Arizona 3.4 Massachusetts 3.3 Oregon 2.7 Washington 2.2 Utah 2.0 Connecticut 1.9 Missouri 1.8 North Carolina 1.4 Indiana 1.4 District of Columbia 1.3 Kansas 1.1 Tennessee 1.1 Georgia 1.1 Pennsylvania 1.1 West Virginia 0.9 New Hampshire 0.8 Alabama 0.6 Rhode Island 0.5 Iowa 0.5 Oklahoma 0.4 South Dakota 0.4 Arkansas 0.3 Louisiana 0.2
(continued on next page)
4
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05 (continued from previous page) Vermont 0.2 South Carolina 0.1 ----- Total Investments 99.3% Other Assets in Excess of Liabilities 0.7 ----- Total Net Assets 100.0%
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings allocations and sectors are as a percentage of long-term investments. Summary of investments by state classification is as a percentage of net assets. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 5 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. 6 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities and information on how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 7 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales charge on redemptions of Class B and C Shares; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/1/04 - 3/31/05. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* ----------------------------------------------------- 10/1/04 3/31/05 10/1/04-3/31/05 Class A Actual.................................... $1,000.00 $1,006.35 $4.35 Hypothetical.............................. 1,000.00 1,020.53 4.38 (5% annual return before expenses) Class B Actual.................................... 1,000.00 1,002.65 8.14 Hypothetical.............................. 1,000.00 1,016.83 8.20 (5% annual return before expenses) Class C Actual.................................... 1,000.00 1,002.65 8.14 Hypothetical.............................. 1,000.00 1,016.83 8.20 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.87%, 1.63%, and 1.63% for Class A, B, and C Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 8 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- MUNICIPAL BONDS 99.2% ALABAMA 0.6% $ 2,930 Alabama Wtr Pollutn Ctl Auth Revolving Fd Ln Ser A (Prerefunded @ 08/15/05) (AMBAC Insd) (a)..... 6.750% 08/15/17 $ 2,977,818 1,000 Jefferson Cnty, AL Ltd Oblig Sch Wt Ser A....... 5.000 01/01/24 1,019,090 3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev Mobile Energy Svc Co Proj Rfdg.................. 6.950 01/01/20 59 ------------ 3,996,967 ------------ ARIZONA 3.4% 8,685 Arizona Sch Fac Brd Ctf Ser B (Prerefunded @ 09/01/13) (FGIC Insd)........................... 5.250 09/01/17 9,592,496 5,000 Phoenix, AZ Civic Impt Corp Sr Lien Ser B (AMT) (FGIC Insd)..................................... 5.250 07/01/32 5,160,750 2,500 Phoenix, AZ Indl Dev Auth Mtg Christian Care Apt Proj Ser A Rfdg................................. 6.500 01/01/26 2,593,225 500 Scottsdale, AZ Indl Dev Auth Rev First Mtg Westminster Vlg Ser A Rfdg (Prerefunded @ 06/01/05)....................................... 8.250 06/01/15 514,540 1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/12 2,027,212 1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)......................... 6.125 09/01/17 1,895,442 ------------ 21,783,665 ------------ ARKANSAS 0.3% 1,270 Jackson Cnty, AR Hlthcare Fac Brd First Mtg Hosp Rev Newport Hosp & Clinic Inc................... 7.375 11/01/11 897,776 1,089 Maumelle, AR Dogwood Addition Prd Muni Ppty Owners Rfdg (Acquired 03/14/01, Cost $1,089,187) (b)............................................. 7.500 03/01/06 1,089,187 ------------ 1,986,963 ------------ CALIFORNIA 12.8% 4,870 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec Sub Pub Impt Proj C (FSA Insd).................. * 09/01/20 2,283,007 305 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien A (FSA Insd)......... 5.250 07/01/20 327,665 5,000 California Infrastructure & Econ Dev Bk Rev Rites-PA-1202R (Inverse Fltg) (Acquired 09/10/03, Cost $5,484,100) (FSA Insd) (b) (c) (d)............................................. 7.566 07/01/11 5,743,200 5,725 California St (FSA Insd)........................ 5.000 02/01/29 5,895,662 1,350 California St Cmntys Dev Auth Rev Daughters of Charity Hlth Ser A.............................. 5.000 07/01/39 1,337,647 10,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)........................................... 5.500 05/01/16 11,064,900 6,575 California St Dept Wtr Res Pwr Supply Rev Rites-PA-1201R (Inverse Fltg) (Acquired 09/08/03, Cost $7,143,277) (MBIA Insd) (b) (c)............................................. 7.566 05/01/20 7,603,001
See Notes to Financial Statements 9 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $ 5,000 California St Dept Wtr Res Pwr Supply Rev Ser A (XLCA Insd)..................................... 5.375% 05/01/17 $ 5,431,600 7,500 California St Drivers Ser 482 (Inverse Fltg) (Acquired 07/19/04, Cost $8,325,750) (XLCA Insd) (b) (c) (d)..................................... 7.911 10/01/10 8,626,950 3,500 California St Pub Wks Brd Lease Rev Dept Corrections Ser C............................... 5.250 06/01/28 3,662,155 2,640 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC Insd)........................................... * 09/01/13 1,588,963 5,430 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC Insd)........................................... * 09/01/14 3,050,900 3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd)......................... * 01/15/17 1,637,790 21,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg..................................... * 01/15/24 6,946,170 15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg..................................... * 01/15/30 3,458,250 6,695 San Francisco, CA City & Cnty Second Ser Issue 29 B Rfdg (FGIC Insd)........................... 5.125 05/01/20 7,070,857 1,600 Turlock, CA Hlth Fac Rev Ctf Partn Emanuel Med Ctr Inc......................................... 5.375 10/15/34 1,621,056 5,000 West Contra Costa CA Uni Election of 2002 Ser B (FSA Insd)...................................... 5.000 08/01/26 5,168,600 ------------ 82,518,373 ------------ COLORADO 6.0% 2,840 Adams Cnty, CO Single Family Mtg Rev Ser A (Escrowed to Maturity) (d)...................... 8.875 08/01/10 3,561,332 5,000 Arapahoe Cnty, CO Wtr & Waste Proj Ser A (MBIA Insd)........................................... 5.125 12/01/32 5,193,500 5,000 Colorado Ed & Cultural Fac Auth Rev Impt Charter Sch Peak to Peak Rfdg (XLCA Insd)............... 5.250 08/15/34 5,235,200 1,000 Colorado Hlth Fac Auth Rev Evangelical Lutheran Ser A........................................... 5.250 06/01/34 1,015,410 5,000 Colorado Springs, CO Utils Rev Sys Sub Lien Ser A Impt & Rfdg................................... 5.000 11/15/21 5,212,500 6,500 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B (MBIA Insd)..................................... * 09/01/20 3,058,640 15,000 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B (MBIA Insd)..................................... * 09/01/20 7,069,050 1,320 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/14 784,727 1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd) (d)........ * 12/15/15 795,754 1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd) (d)........ * 12/15/16 746,082
10 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- COLORADO (CONTINUED) $ 1,330 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A (Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/18 $ 614,367 3,690 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (d)................................ 11.500% 09/01/12 5,436,034 ------------ 38,722,596 ------------ CONNECTICUT 1.9% 2,785 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg) (Acquired 07/09/02, Cost $3,177,971) (FGIC Insd) (b) (c) (d)..................................... 8.369 08/15/15 3,289,976 2,950 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg) (Acquired 07/09/02, Cost $3,323,232) (FGIC Insd) (b) (c) (d)..................................... 8.369 08/15/16 3,480,941 2,530 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A--Private Placement (e).................. 6.400 09/01/11 2,662,901 2,470 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A--Private Placement (Prerefunded @ 09/01/07) (e)................................... 6.400 09/01/11 2,668,366 ------------ 12,102,184 ------------ DISTRICT OF COLUMBIA 1.3% 5,150 District Columbia Tax Incrmnt Gallary Place Proj (FSA Insd)...................................... 5.250 07/01/27 5,391,483 3,000 Metropolitan Washington DC Arpt Auth Sys Ser A (AMT) (FGIC Insd)............................... 5.250 10/01/32 3,093,330 ------------ 8,484,813 ------------ FLORIDA 5.9% 5,000 Broward Cnty, FL Arpt Sys Rev Ser J-I (AMT) (AMBAC Insd).................................... 5.250 10/01/26 5,189,750 1,100 Capital Tr Agy FL Rev Ft Lauderdale Proj (AMT)........................................... 5.750 01/01/32 1,095,424 9,000 Dade Cnty, FL Gtd Entitlement Rev Cap Apprec Ser A Rfdg (MBIA Insd).............................. * 02/01/18 4,351,680 5,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)........................................... 5.950 07/01/20 5,094,000 6,385 Lake Cnty, FL Sch Brd Ctf Part (AMBAC Insd)..... 5.375 07/01/16 6,934,493 500 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 544,195 595 Orange Cnty, FL Tourist Dev Tax Rev (Escrowed to Maturity) (AMBAC Insd).......................... 6.000 10/01/16 609,691 12,860 Orlando, FL Utils Commn Wtr Rfdg................ 5.250 10/01/19 13,827,201 808 Tampa Palms, FL Open Space & Tran Cmnty Dev Dist Rev Cap Impt Area 7 Proj (Prerefunded @ 05/01/05)....................................... 7.500 05/01/18 827,311 ------------ 38,473,745 ------------
See Notes to Financial Statements 11 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- GEORGIA 1.1% $ 6,310 Municipal Elec Auth GA Combustion Turbine Ser A (MBIA Insd)..................................... 5.250% 11/01/17 $ 6,821,741 5 Municipal Elec Auth GA Combustion Turbine Ser A (Prerefunded @ 11/01/12) (MBIA Insd)............ 5.250 11/01/17 5,508 ------------ 6,827,249 ------------ ILLINOIS 8.1% 5,000 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd)..................................... * 12/01/20 2,320,650 3,000 Chicago, IL Lakefront Millennium Pkg Fac (MBIA Insd) (f)....................................... 0/5.650 01/01/19 3,083,940 1,000 Chicago, IL Metro Wtr Reclamation Dist Gtr Chicago (Escrowed to Maturity).................. 7.000 01/01/11 1,158,110 8,050 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien C-2 Rfdg (AMT) (XLCA Insd)................. 5.250 01/01/34 8,326,115 5,100 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airl Proj Ser B Rfdg (AMT) (g) (h).............. 5.200 04/01/11 867,000 3,210 Chicago, IL Proj & Rfdg Ser C (FGIC Insd) (d)... 5.750 01/01/16 3,550,099 135 Chicago, IL Single Family Mtg Rev Ser A (AMT) (GNMA Collateralized)........................... 7.000 09/01/27 135,579 1,000 Chicago, IL Tax Increment Alloc Santn Drain & Ship Canal Ser A................................ 7.750 01/01/14 1,039,100 2,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A..................................... 6.500 12/01/05 2,048,740 1,000 Cook Cnty, IL Cmnty College Dist No 508 Chicago Ctf Part (FGIC Insd)............................ 8.750 01/01/07 1,097,150 2,265 Cook Cnty, IL Cons High Sch Dist No 200 Oak Park (FSA Insd) (d).................................. * 12/01/11 1,733,382 5,000 Cook Cnty, IL Ser A (FGIC Insd)................. 5.500 11/15/31 5,370,900 1,500 Hodgkins, IL Tax Increment Ser A Rfdg........... 7.625 12/01/13 1,577,220 1,310 Huntley, IL Increment Alloc Rev Huntley Redev Proj Ser A...................................... 8.500 12/01/15 1,358,811 170 Illinois Dev Fin Auth Rev Cmnty Fac Clinic Altgeld Proj.................................... 8.000 11/15/06 165,027 5,000 Illinois St First Ser (FSA Insd)................ 5.250 12/01/21 5,363,850 9,250 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec McCormick Rfdg (MBIA Insd) (f)............................................. 0/5.400 06/15/19 6,925,197 3,555 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec McCormick Ser A Rfdg (MBIA Insd)........................................... * 12/15/15 2,193,399 1,120 Saint Charles, IL Indl Dev Rev Tri-City Ctr Proj (Acquired 11/17/93, Cost $1,120,000) (b)........ 7.500 11/01/13 1,117,939 4,270 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd)........................................... * 12/01/15 2,631,473 ------------ 52,063,681 ------------
12 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- INDIANA 1.4% $ 2,500 Indiana Bd Bk Spl Pgm Hendricks Redev (Prerefunded @ 02/01/07) (LOC--Canadian Imperial Bank)........................................... 6.200% 02/01/23 $ 2,693,950 1,910 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj Ser A........................................... 7.125 06/01/34 1,758,079 550 Indianapolis, IN Loc Pub Impt Bd Bk Ser D....... 6.750 02/01/14 647,636 140 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/11 87,532 140 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/12 81,084 135 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/13 72,429 130 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/14 64,609 130 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/15 59,849 135 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/16 57,588 225 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (d)................................... * 06/30/17 88,909 3,295 Vigo Cnty, IN Elem Sch Bldg First Mtg Impt & Rfdg (FSA Insd)................................. 5.250 01/10/22 3,478,630 ------------ 9,090,295 ------------ IOWA 0.5% 640 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)................................. 6.000 07/01/07 665,581 2,400 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)................................. 5.750 07/01/17 2,567,160 ------------ 3,232,741 ------------ KANSAS 1.1% 6,600 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (Prerefunded @ 09/01/10) (MBIA Insd) (d)........ 5.625 09/01/13 7,326,924 ------------ LOUISIANA 0.2% 1,400 West Feliciana Parish, LA Pollutn Ctl Rev Gulf States Util Co Proj Ser A....................... 7.500 05/01/15 1,406,244 ------------ MASSACHUSETTS 3.3% 7,500 Massachusetts St Fed Hwy Ser A.................. 5.750 06/15/14 8,255,100 3,500 Massachusetts St Hlth & Ed Fac Auth Rev Ser G (MBIA Insd)..................................... 5.000 07/01/13 3,576,650 1,500 Massachusetts St Indl Fin Agy Hillcrest Ed Ctr Inc Proj (Prerefunded @ 07/01/05)............... 8.450 07/01/18 1,535,895
See Notes to Financial Statements 13 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $ 2,770 Massachusetts St Indl Fin Agy Rev First Mtg Reeds Landing Proj (Variable Rate Coupon)....... 7.100% 10/01/28 $ 2,715,182 5,000 Massachusetts St Rites PA 1290 (Inverse Fltg) (Acquired 03/23/05, Cost $5,458,000) (FSA Insd) (b) (c) (d)..................................... 7.750 03/01/24 5,448,950 ------------ 21,531,777 ------------ MICHIGAN 3.9% 840 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $840,000) (b).... 6.850 05/01/21 859,219 5,000 Detroit, MI Sew Disp Rev Sr Lien Ser A Rfdg (FGIC Insd)..................................... 5.125 07/01/31 5,117,900 5,000 Michigan St Bldg Auth Rev Fac Prog Ser II....... 5.500 10/15/16 5,495,550 5,000 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (AMT) (XLCA Insd)........................ 5.450 12/15/32 5,241,700 9,739 Michigan St Strategic Fd Ltd Oblig Rev Great Lakes Pulp & Fiber Proj (AMT) (h) (i)........... 8.000 12/01/27 1,435,114 1,935 Michigan St Strategic Fd Solid Genesee Pwr Sta Proj Rfdg (AMT)................................. 7.500 01/01/21 1,833,490 5,000 Western Townships, MI Util Sew Rfdg (MBIA Insd)........................................... 5.250 01/01/16 5,337,850 ------------ 25,320,823 ------------ MISSOURI 1.8% 3,000 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 3,146,460 2,835 Kansas City, MO Port Auth Fac Riverfront Park Proj Ser A (d).................................. 5.750 10/01/06 2,894,733 3,935 Macon, MO Ctf Part (MBIA Insd).................. 5.250 08/01/17 4,189,083 1,000 Missouri St Dev Fin Brd Infrastructure Fac Rev Crackerneck Creek Proj Ser C.................... 5.000 03/01/26 970,910 530 Saint Louis, MO Tax Increment Rev Scullin Redev Area Ser A...................................... 10.000 08/01/10 601,380 ------------ 11,802,566 ------------ NEW HAMPSHIRE 0.8% 1,555 New Hampshire Higher Ed & Hlth Fac Auth Rev (d)............................................. 8.800 06/01/09 1,644,086 760 New Hampshire Higher Ed & Hlth Fac Auth Rev Daniel Webster College Issue Rfdg (d)........... 6.100 07/01/09 803,404 750 New Hampshire St Business Fin Auth Elec Fac Rev Plymouth Cogeneration (AMT) (Acquired 06/29/93, Cost $734,079) (b).............................. 7.750 06/01/14 766,320 1,000 New Hampshire St Business Fin Auth Rev Alice Peck Day Hlth Sys Ser A......................... 6.875 10/01/19 1,006,490 1,000 New Hampshire St Tpk Sys Rev Ser A Rfdg (FGIC Insd)........................................... 6.750 11/01/11 1,078,640 ------------ 5,298,940 ------------
14 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- NEW JERSEY 7.9% $ 2,000 Camden Cnty, NJ Impt Auth Lease Rev Dockside Refrig (Acquired 01/29/97, Cost $2,074,739) (b) (j)............................................. 8.400% 04/01/24 $ 1,911,240 3,250 Landis, NJ Sew Auth Swr Rev (Inverse Fltg) (FGIC Insd) (c)....................................... 8.720 09/19/19 3,980,600 6,130 Middlesex Cnty, NJ Util Auth Swr Rev Ser A Rfdg (MBIA Insd)..................................... 6.250 08/15/10 6,706,220 2,000 New Jersey Econ Dev Auth Cigarette Tax.......... 5.750 06/15/34 2,096,640 2,000 New Jersey Econ Dev Auth Holt Hauling & Warehsg Rev Ser G Rfdg (h).............................. 8.400 12/15/15 1,590,600 1,900 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06)....................................... 8.500 11/01/16 2,104,934 350 New Jersey Econ Dev Auth Rev RWJ Hlthcare Corp (FSA Insd)...................................... 6.250 07/01/14 358,043 1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes (Prerefunded @ 07/01/05)........................ 7.500 07/01/20 1,031,860 1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes (Prerefunded @ 07/01/05)........................ 7.500 07/01/25 1,031,860 8,000 New Jersey Econ Dev Auth Sch Fac Constr Ser F (Prerefunded @ 06/15/13) (FGIC Insd)............ 5.250 06/15/17 8,851,680 755 New Jersey St Tpk Auth Tpk Rev Ser C (MBIA Insd)........................................... 6.500 01/01/16 897,363 2,725 New Jersey St Tpk Auth Tpk Rev Ser C (Escrowed to Maturity) (MBIA Insd)........................ 6.500 01/01/16 3,222,558 5,710 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt Ser A (AMBAC Insd).............................. 5.750 09/15/10 6,230,238 10,000 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt Ser B (Prerefunded @ 09/15/10) (AMBAC Insd)..... 6.000 09/15/15 11,298,900 ------------ 51,312,736 ------------ NEW YORK 15.5% 5,000 Metropolitan Trans Auth NY Rev Ser B (FGIC Insd)........................................... 5.250 11/15/18 5,418,000 10,000 Nassau Cnty, NY Interim Fin Auth Ser A (Prerefunded @ 11/15/10)........................ 5.750 11/15/14 11,233,800 4,250 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Proj Ser A............................ 6.250 03/01/15 4,310,350 5,000 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Rites PA 1289 (Inverse Fltg) (Acquired 03/09/05, Cost $5,451,150) (MBIA Insd) (b) (c)............................................. 7.100 06/15/27 5,425,700 4,800 New York City Ser A............................. 7.000 08/01/07 5,112,672 21,860 New York City Ser B (MBIA Insd)................. 5.875 08/01/15 24,438,824 5,000 New York City Ser D (MBIA Insd)................. 5.200 08/01/14 5,369,950 5,000 New York City Transitional Drivers Ser 307 (Inverse Fltg) (Acquired 11/06/02, Cost $5,439,826) (AMBAC Insd) (b) (c) (d)............ 7.921 08/01/19 5,768,750 695 New York St Dorm Auth Rev Mental Hlth Ser A..... 5.750 02/15/11 738,451 680 New York St Dorm Auth Rev Mental Hlth Ser A..... 5.750 02/15/12 722,514 1,590 New York St Dorm Auth Rev Mental Hlth Ser A (Prerefunded @ 02/15/07)........................ 5.750 02/15/11 1,702,826
See Notes to Financial Statements 15 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 1,595 New York St Dorm Auth Rev Mental Hlth Ser A (Prerefunded @ 02/15/07)........................ 5.750% 02/15/12 $ 1,708,181 2,500 New York St Energy Resh & Dev Auth Gas Fac Rev (Inverse Fltg) (c).............................. 10.282 04/01/20 3,011,325 3,000 New York St Energy Resh & Dev Auth Gas Fac Rev Brooklyn Union Gas Ser B (Inverse Fltg) (AMT) (c)............................................. 11.592 07/01/26 3,381,330 10,725 New York St Environmental Fac Rev Fds-Second Resolution (d).................................. 5.000 06/15/20 11,349,838 10,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg... 5.000 11/15/22 10,394,300 ------------ 100,086,811 ------------ NORTH CAROLINA 1.4% 8,700 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 9,356,154 ------------ OKLAHOMA 0.4% 2,250 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev (FGIC Insd)..................................... 5.250 10/01/29 2,351,362 385 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class B (AMT) (GNMA Collateralized)................... 7.997 08/01/18 395,491 ------------ 2,746,853 ------------ OREGON 2.7% 5,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd)........................................... 5.250 07/01/22 5,359,600 1,000 Port Morrow, OR Pollutn Ctl Portland Gen A Rfdg (Variable Rate Coupon).......................... 5.200 05/01/33 1,045,110 10,000 Portland, OR Swr Sys Rev Ser A (FGIC Insd)...... 5.750 08/01/18 10,996,100 ------------ 17,400,810 ------------ PENNSYLVANIA 1.1% 1,000 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care............................ 6.250 02/01/35 1,021,240 5,250 Philadelphia, PA Auth Indl Ser B (FSA Insd)..... 5.500 10/01/16 5,781,773 ------------ 6,803,013 ------------ RHODE ISLAND 0.5% 1,305 Rhode Island St Econ Dev Corp Rev (d)........... 7.250 07/01/10 1,308,054 2,000 Rhode Island St Hlth & Ed Bldg Higher Ed Johnson & Wales Rfdg (XLCA Insd)........................ 5.375 04/01/19 2,144,940 ------------ 3,452,994 ------------ SOUTH CAROLINA 0.1% 700 Piedmont Muni Pwr Agy SC Elec Rev Rfdg.......... 5.000 01/01/25 682,787 ------------ SOUTH DAKOTA 0.4% 1,000 South Dakota St Hlth & Ed Fac Auth Rev Huron Regl Med Ctr.................................... 7.250 04/01/20 1,013,300 1,250 South Dakota St Hlth & Ed Fac Auth Rev Sioux VY Hosp & Hlth Sys Ser A........................... 5.250 11/01/34 1,269,413 ------------ 2,282,713 ------------
16 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- TENNESSEE 1.1% $ 4,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp Ser B Impt & Rfdg (MBIA Insd)....................... 7.750% 07/01/29 $ 4,993,840 2,000 Springfield, TN Hlth & Ed Jesse Holman Jones Hosp Proj (Prerefunded @ 04/01/06).............. 8.500 04/01/24 2,153,580 ------------ 7,147,420 ------------ TEXAS 8.4% 500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev Saint Luke's Lutheran Hosp (Escrowed to Maturity)..... 7.000 05/01/21 642,300 3,170 Brazos River Auth TX Pollutn Ctl Rev Adj Elec Co Proj Ser C Rfdg (Variable Rate Coupon) (AMT).... 5.750 05/01/36 3,373,070 90 Coastal Wtr Auth TX Conveyance Sys Rev (Escrowed to Maturity) (AMBAC Insd)....................... 6.250 12/15/17 90,154 5,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A Impt & Rfdg (AMT) (FGIC Insd)................... 5.500 11/01/31 5,222,600 7,350 Grapevine Colleyville Indpt Sch Dist TX (PSF Gtd)............................................ * 08/15/11 5,714,184 10,000 Houston, TX Hotel Occupancy Tax Convtn & Entertnmnt Ser B (AMBAC Insd)................... 5.750 09/01/14 11,120,000 7,500 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $7,623,805) (FSA Insd) (b) (c)................................... 8.793 05/15/14 8,995,500 6,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $6,312,134) (FSA Insd) (b) (c)................................... 8.793 05/15/15 7,500,813 3,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $3,254,875) (FSA Insd) (b) (c) (d)............................... 8.793 05/15/16 3,900,423 2,000 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj................................... 7.200 01/01/21 2,007,120 500 Texas Gen Svc Cmnty Part Int Office Bldg & Land Acquisition Proj................................ 7.000 08/01/19 506,650 500 Texas Gen Svc Cmnty Part Int Office Bldg & Land Acquisition Proj................................ 7.000 08/01/24 506,655 605 Texas Gen Svc Cmnty Part Lease Purch Ctf........ 7.500 02/15/13 613,209 1,925 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev Coll Ser C-2 Rfdg (Inverse Fltg) (AMT) (GNMA Collateralized) (c)............................. 11.437 07/02/24 1,963,192 40 Texas St Higher Ed Coordinating Brd College Student Ln Rev (AMT)............................ 7.849 10/01/25 40,244 2,220 Wylie, TX Indpt Sch Dist Rfdg (PSF Gtd)......... 5.000 08/15/30 2,259,250 ------------ 54,455,364 ------------ UTAH 2.0% 1,340 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (h)............................................. 7.800 09/01/15 274,700 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (h)............................................. 8.000 09/01/20 205,000 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (h)............................................. 7.800 09/01/25 205,000 11,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg... 6.150 02/15/12 12,436,160
See Notes to Financial Statements 17 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- UTAH (CONTINUED) $ 20 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A1 (AMT) (FHA Gtd)................................. 7.100% 07/01/14 $ 20,429 30 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A2 (AMT) (FHA Gtd)................................. 7.200 01/01/27 30,636 ------------ 13,171,925 ------------ VERMONT 0.2% 1,000 Vermont Ed & Hlth Bldg Fing Agy Rev Bennington College Proj.................................... 6.625 10/01/29 1,012,170 ------------ WASHINGTON 2.2% 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (XLCA Insd)................................ 5.500 07/01/17 5,447,100 8,000 King Cnty, WA Sch Dist No 411 (FGIC Insd) (d)... 5.250 12/01/20 8,605,520 ------------ 14,052,620 ------------ WEST VIRGINIA 0.9% 1,500 West Virginia St Hosp Fin Auth Hosp Rev Bears & Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 1,503,765 4,000 West Virginia St Hosp Fin Auth Hosp Rev Bears & Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 4,010,080 ------------ 5,513,845 ------------ TOTAL LONG-TERM INVESTMENTS 99.2% (Cost $622,077,834)......................................................... 641,448,761 SHORT-TERM INVESTMENT 0.1% (Cost $600,000)............................................................. 600,000 ------------ TOTAL INVESTMENTS 99.3% (Cost $622,677,834)......................................................... 642,048,761 OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%................................... 4,344,233 ------------ NET ASSETS 100.0%............................................................ $646,392,994 ============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) Asset segregated as collateral for open futures transactions. (b) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 11.1% of net assets. (c) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. 18 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued Conversely, as the floating rate declines, the coupon is increased. These instruments are typically used by the Fund to enhance the yield of the portfolio. The price of these securities may be more volatile than the price of a comparable fixed rate security. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. (d) The Fund owns 100% of the bond issuance. (e) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (f) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (g) This borrower has filed for protection in federal bankruptcy court. (h) Non-income producing security. (i) Payment-in-kind security. (j) Interest is accruing at less than the stated coupon. AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax FGIC--Financial Guaranty Insurance Co. FHA--Federal Housing Administration FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. PSF--Public School Fund XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 19 VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2005 (Unaudited) ASSETS: Total Investments (Cost $622,677,834)....................... $642,048,761 Cash........................................................ 80,968 Receivables: Interest.................................................. 8,526,817 Fund Shares Sold.......................................... 398,803 Investments Sold.......................................... 265,000 Other....................................................... 183,616 ------------ Total Assets............................................ 651,503,965 ------------ LIABILITIES: Payables: Investments Purchased..................................... 2,354,972 Fund Shares Repurchased................................... 926,862 Income Distributions...................................... 736,006 Distributor and Affiliates................................ 365,399 Investment Advisory Fee................................... 270,781 Variation Margin on Futures............................... 74,062 Trustees' Deferred Compensation and Retirement Plans........ 245,313 Accrued Expenses............................................ 137,576 ------------ Total Liabilities....................................... 5,110,971 ------------ NET ASSETS.................................................. $646,392,994 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $654,736,852 Net Unrealized Appreciation................................. 19,417,105 Accumulated Undistributed Net Investment Income............. 1,302,754 Accumulated Net Realized Loss............................... (29,063,717) ------------ NET ASSETS.................................................. $646,392,994 ============ NET ASSET VALUE PER COMMON SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $591,005,845 and 40,547,265 shares of beneficial interest issued and outstanding)............. $ 14.58 Maximum sales charge (4.75%* of offering price)......... .73 ------------ Maximum offering price to public........................ $ 15.31 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $42,683,255 and 2,932,309 shares of beneficial interest issued and outstanding)............. $ 14.56 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $12,703,894 and 873,921 shares of beneficial interest issued and outstanding)............. $ 14.54 ============
* On sales of $100,000 or more, the sales charge will be reduced. 20 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2005 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 17,607,578 ------------ EXPENSES: Investment Advisory Fee..................................... 1,615,790 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $750,613, $229,470 and $66,181, respectively)............................................. 1,046,264 Shareholder Services........................................ 211,836 Legal....................................................... 35,973 Custody..................................................... 30,278 Trustees' Fees and Related Expenses......................... 13,761 Other....................................................... 173,147 ------------ Total Expenses.......................................... 3,127,049 Less Credits Earned on Cash Balances.................... 5,228 ------------ Net Expenses............................................ 3,121,821 ------------ NET INVESTMENT INCOME....................................... $ 14,485,757 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 546,230 Futures................................................... 190,657 ------------ Net Realized Gain........................................... 736,887 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 30,728,214 ------------ End of the Period: Investments............................................. 19,370,927 Futures................................................. 46,178 ------------ 19,417,105 ------------ Net Unrealized Depreciation During the Period............... (11,311,109) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(10,574,222) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,911,535 ============
See Notes to Financial Statements 21 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, 2005 SEPTEMBER 30, 2004 ------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 14,485,757 $ 30,700,407 Net Realized Gain/Loss................................. 736,887 (2,789,110) Net Unrealized Depreciation During the Period.......... (11,311,109) (19,307) ------------ ------------- Change in Net Assets from Operations................... 3,911,535 27,891,990 ------------ ------------- Distributions from Net Investment Income: Class A Shares....................................... (13,294,305) (27,226,749) Class B Shares....................................... (842,415) (1,926,469) Class C Shares....................................... (243,094) (565,309) ------------ ------------- Total Distributions.................................... (14,379,814) (29,718,527) ------------ ------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (10,468,279) (1,826,537) ------------ ------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold.............................. 20,488,249 37,955,532 Net Asset Value of Shares Issued Through Dividend Reinvestment......................................... 9,884,731 20,108,172 Cost of Shares Repurchased............................. (45,401,196) (118,216,715) ------------ ------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (15,028,216) (60,153,011) ------------ ------------- TOTAL DECREASE IN NET ASSETS........................... (25,496,495) (61,979,548) NET ASSETS: Beginning of the Period................................ 671,889,489 733,869,037 ------------ ------------- End of the Period (Including accumulated undistributed net investment income of $1,302,754 and $1,196,811, respectively)........................................ $646,392,994 $ 671,889,489 ============ =============
22 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (c) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $14.81 $14.84 $15.03 $14.56 $14.06 $14.50 ------ ------ ------ ------ ------ ------ Net Investment Income........... .33(a) .66(a) .67(a) .71 .74 .79 Net Realized and Unrealized Gain/Loss..................... (.23) (.05) (.19) .46 .49 (.42) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .10 .61 .48 1.17 1.23 .37 Less Distributions from Net Investment Income............... .33 .64 .67 .70 .73 .81 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $14.58 $14.81 $14.84 $15.03 $14.56 $14.06 ====== ====== ====== ====== ====== ====== Total Return (b).................. .63%* 4.20% 3.31% 8.35% 8.93% 2.69% Net Assets at End of the Period (In millions)................... $591.0 $609.4 $658.5 $696.4 $701.5 $688.3 Ratio of Expenses to Average Net Assets.......................... .87% .89% .88% .87% .83% .89% Ratio of Interest Expense to Average Net Assets.............. N/A N/A N/A N/A N/A .01% Ratio of Net Investment Income to Average Net Assets.............. 4.44% 4.46% 4.53% 4.89% 5.16% 5.58% Portfolio Turnover................ 16%* 15% 46% 49% 31% 45%
(a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million of more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. With respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses by $.01 and increase the ratio of net investment income to average net assets from 4.85% to 4.89%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. * Non-Annualized N/A=Not Applicable. See Notes to Financial Statements 23 VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (c) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $14.79 $14.82 $15.02 $14.54 $14.05 $14.49 ------ ------ ------ ------ ------ ------ Net Investment Income........... .27(a) .55(a) .56(a) .60 .63 .68 Net Realized and Unrealized Gain/Loss..................... (.23) (.05) (.20) .48 .48 (.42) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .04 .50 .36 1.08 1.11 .26 Less Distributions from Net Investment Income............... .27 .53 .56 .60 .62 .70 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $14.56 $14.79 $14.82 $15.02 $14.54 $14.05 ====== ====== ====== ====== ====== ====== Total Return (b).................. .26%* 3.41% 2.48% 7.64% 8.06% 1.90% Net Assets at End of the Period (In millions)................... $ 42.7 $ 48.8 $ 58.4 $ 65.0 $ 66.6 $ 69.5 Ratio of Expenses to Average Net Assets.......................... 1.63% 1.64% 1.63% 1.62% 1.59% 1.67% Ratio of Interest Expense to Average Net Assets.............. N/A N/A N/A N/A N/A .01% Ratio of Net Investment Income to Average Net Assets.............. 3.68% 3.71% 3.78% 4.13% 4.40% 4.86% Portfolio Turnover................ 16%* 15% 46% 49% 31% 45%
(a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses by $.01 and increase the ratio of net investment income to average net assets from 4.09% to 4.13%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. * Non-Annualized N/A=Not Applicable 24 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (c) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $14.77 $14.80 $15.00 $14.52 $14.04 $14.48 ------ ------ ------ ------ ------ ------ Net Investment Income........... .27(a) .55(a) .56(a) .60 .63 .68 Net Realized and Unrealized Gain/Loss..................... (.23) (.05) (.20) .48 .47 (.42) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .04 .50 .36 1.08 1.10 .26 Less Distributions from Net Investment Income............... .27 .53 .56 .60 .62 .70 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $14.54 $14.77 $14.80 $15.00 $14.52 $14.04 ====== ====== ====== ====== ====== ====== Total Return (b).................. .27%* 3.43% 2.48% 7.65% 8.00% 1.91% Net Assets at End of the Period (In millions)................... $ 12.7 $ 13.7 $ 17.0 $ 18.8 $ 17.4 $ 13.8 Ratio of Expenses to Average Net Assets.......................... 1.63% 1.64% 1.63% 1.62% 1.62% 1.66% Ratio of Interest Expense to Average Net Assets.............. N/A N/A N/A N/A N/A .01% Ratio of Net Investment Income to Average Net Assets.............. 3.68% 3.71% 3.78% 4.13% 4.37% 4.84% Portfolio Turnover................ 16%* 15% 46% 49% 31% 45%
(a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses by $.01 and increase the ratio of net investment income to average net assets from 4.09% to 4.13%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. * Non-Annualized N/A=Not Applicable. See Notes to Financial Statements 25 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Municipal Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a diversified open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Fund commenced investment operations on August 1, 1990. The distribution of the Fund's Class B and Class C shares commenced on August 24, 1992 and August 13, 1993, respectively. The Fund registered Class I Shares on September 1, 2004. There were no sales of Class I Shares for the period ended March 31, 2005. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Future contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Legal expenditures that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2005, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies 26 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset these losses against any future realized capital gains. At September 30, 2004, the Fund had an accumulated capital loss carryforward for tax purposes of $27,985,150 which will expire according to the following schedule.
AMOUNT EXPIRATION $11,008,462................................................. September 30, 2008 9,728,055................................................. September 30, 2009 7,248,633................................................. September 30, 2010
At March 31, 2005, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $622,451,621 ============ Gross tax unrealized appreciation........................... $ 33,982,194 Gross tax unrealized depreciation........................... (14,385,054) ------------ Net tax unrealized appreciation investments................. $ 19,597,140 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2004 was as follows: Distribution paid from: Ordinary Income........................................... $291,037 Long-term capital gain.................................... -0- -------- $291,037 ========
As of September 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $117,235
F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's custody fee was reduced by $5,228 as a result of credits earned on cash balances. 27 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
For the six months ended March 31, 2005, the Fund recognized expenses of approximately $15,400 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $37,200 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $166,700 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are also officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and, to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $161,615 are included in "Other" assets on the Statements of Assets and Liabilities at March 31, 2005. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 28 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2005, capital aggregated $595,265,452, $45,885,915 and $13,585,485 for Classes A, B and C, respectively. For the six months ended March 31, 2005, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,194,612 $ 17,673,067 Class B................................................... 98,759 1,462,901 Class C................................................... 91,984 1,352,281 ---------- ------------ Total Sales................................................. 1,385,355 $ 20,488,249 ========== ============ Dividend Reinvestment: Class A................................................... 621,272 $ 9,175,759 Class B................................................... 35,811 528,253 Class C................................................... 12,268 180,719 ---------- ------------ Total Dividend Reinvestment................................. 669,351 $ 9,884,731 ========== ============ Repurchases: Class A................................................... (2,413,441) $(35,703,003) Class B................................................... (502,182) (7,411,565) Class C................................................... (155,131) (2,286,628) ---------- ------------ Total Repurchases........................................... (3,070,754) $(45,401,196) ========== ============
At September 30, 2004, capital aggregated $604,119,629, $51,306,326 and $14,339,113 for Classes A, B and C, respectively. For the year ended September 30, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 2,289,405 $ 33,797,656 Class B................................................... 160,379 2,372,126 Class C................................................... 121,130 1,785,750 ---------- ------------- Total Sales................................................. 2,570,914 $ 37,955,532 ========== ============= Dividend Reinvestment: Class A................................................... 1,256,987 $ 18,523,059 Class B................................................... 80,748 1,188,399 Class C................................................... 26,991 396,714 ---------- ------------- Total Dividend Reinvestment................................. 1,364,726 $ 20,108,172 ========== ============= Repurchases: Class A................................................... (6,774,537) $ (99,847,334) Class B................................................... (879,827) (12,919,631) Class C................................................... (372,418) (5,449,750) ---------- ------------- Total Repurchases........................................... (8,026,782) $(118,216,715) ========== =============
29 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2005 and the year ended September 30, 2004, 204,037 and 144,827 Class B Shares converted to Class A Shares, respectively and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2005 and the year ended September 30, 2004, 46,232 and 2,500 Class C Shares automatically convert to Class A Shares and are shown in the above table as sales of Class A Shares and repurchases of Class C Shares. Class B and C Shares are offered without a front end sales charges, but are subject to a contingent deferred sale charge (CDSC). The CDSC will be imposed on most redemptions made within six years of the purchase for Class B and one year of the purchase for Class C as detailed in the following schedule.
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, 2005, Van Kampen as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $38,600 and CDSC on redeemed shares of approximately $43,700. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $105,690,871 and $115,945,601, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. 30 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio, to manage the portfolio's effective yield, maturity and duration, or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counter parties to meet the terms of their contracts. During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in futures on U.S. Treasury Notes. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2005, were as follows:
CONTRACTS Outstanding at September 30, 2004........................... 575 Futures Opened.............................................. 540 Futures Closed.............................................. (921) ---- Outstanding at March 31, 2005............................... 194 ====
The futures contracts outstanding as of March 31, 2005, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 2-Year Futures, June 2005 (Current Notional Value of $206,891 per contract).................. 38 $24,786 U.S. Treasury Notes 5 Year Futures, June 2005 (Current Notional Value of $107,094 per contract).................. 156 21,392 --- ------- 194 $46,178 === =======
6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans"). The Plans govern payments for: the 31 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to 0.25% of Class A average daily net assets and up to 1.00% each for Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $2,592,900 and $185,900 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2005, are payments retained by Van Kampen of approximately $186,700 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $34,800. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. The consolidated action also names as defendants certain individual Trustees and Directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of certain Van Kampen funds; the named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of proprietary mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with the consolidated complaint described in the preceding paragraph. Plaintiff has sought leave to file a second amended derivative compliant that alleges that the Adviser permitted or recklessly disregarded market timing and late trading in its proprietary mutual funds in order to increase assets under management and fees. However, pursuant to an agreement between 32 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued the parties, the plaintiff's proposed second amended derivative complaint was withdrawn and the allegations regarding market timing and late trading asserted therein were filed in a separate complaint and coordinated with other cases related to market timing that have been centralized in a federal court. The defendants have moved to dismiss these actions and otherwise intend to defend them vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 8. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 33 VAN KAMPEN MUNICIPAL INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* - President and Chief Executive Officer JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 34 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 49, 349, 549 MIF SAR 5/05 RN05-01059P-Y03/05 (VAN KAMPEN INVESTMENTS LOGO) Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Intermediate Term Municipal Income Fund performed during the semi-annual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2005. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/05
A SHARES B SHARES C SHARES 5/28/1993 5/28/1993 10/19/1993 --------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 3.25% 3.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES Since Inception 5.41% 5.11% 5.03% 5.03% 4.26% 4.26% 10-year 5.34 5.00 4.89 4.89 4.60 4.60 5-year 5.48 4.77 4.92 4.92 4.74 4.74 1-year 2.28 -1.04 2.07 -0.91 1.61 0.62 6-month 0.81 -2.47 0.99 -2.00 0.52 -0.47 --------------------------------------------------------------------------------------------- SEC Yield 2.87% 2.19% 2.22% Unsubsidized SEC Yield 2.77 2.09 2.12
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 3.25 percent for Class A shares, a contingent deferred sales charge of 3.00 percent for Class B shares (in year one and declining to zero after year four), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares six years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. SEC yield is a calculation for determining the amount of portfolio income, excluding non- income items as prescribed by the SEC. The subsidized SEC yields reflect some or all of the expenses that the adviser had voluntarily waived. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005 Van Kampen Intermediate Term Municipal Income Fund is managed by the Adviser's Municipal Fixed Income team, which includes Timothy D. Haney, Vice President of the Adviser.(1) MARKET CONDITIONS The six-month period ended March 31, 2005, was characterized by continued short-term interest rate increases, and the specter of rising inflation resulting from record-high crude oil prices. The Federal Open Market Committee (the "Fed") raised the federal funds target rate 100 basis points during the period through a series of four, "measured" 0.25 percent tightenings to 2.75 percent by the end of March. Although rates in the short and intermediate areas of the yield curve shifted upward as the Fed tightened, long-term interest rates fell as buyers did not seem deterred by the prospect of rising inflation. As a result, the yield curve (which measures the difference in yields between short and longer-term yields) flattened and the long end of the municipal market handily outperformed the shorter end. The municipal market posted positive overall returns during the period, though it was not uniformly strong. In contrast to the strong showing by longer-term bonds, shorter-term municipals were hampered by the Fed's tightening and turned in a slightly negative showing. Within the investment-grade segment of the market, yield differentials between BBB-rated municipals and AAA-rated securities were flat to slightly wider, though BBB-rated securities still outperformed high grades due to their higher coupons, while securities rated below investment grade strongly outperformed as investors sought out their higher yields. The Fed's interest rate hikes did not dampen investors' appetites for municipal bonds, as net inflows into municipal bond funds topped $700 million during the period. The supply of new issues was modest during the closing months of 2004 (the first half of the period) before soaring in the opening months of 2005 as long-term issuers rushed to bring securities to market in anticipation of additional interest rate increases in the near term. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The fund returned 0.81 percent for the six months ended March 31, 2005 (Class A shares, unadjusted for sales charge). In comparison, the fund's benchmark index, the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period. TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
-------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 0.81% 0.99% 0.52% 1.21% --------------------------------------------------------------
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND INDEX DEFINITION. The fund's underperformance relative to its benchmark was driven largely by its emphasis on the short-to-intermediate segment of the market. While this positioning tends to keep the fund's volatility at a modest level over longer time periods, it can hamper returns over shorter periods when yields on these securities rise more rapidly than those of longer-term bonds. That was the pattern which dominated the market during the review period, and the fund's returns suffered as a result. In fact, intermediate municipal funds as a group underperformed their longer-maturity counterparts over the period. In managing the fund, we continued to focus on trading between liquid, high- quality securities which our analysis identified as compelling total return opportunities. Our strategy involves buying these bonds when they are attractively valued, and selling them when they reach our return targets in order to reinvest the proceeds into bonds with greater future potential for total return. Most of our trading during the six-month period occurred in the 10-to-15 year portion of the market. Our purchases were largely of securities with 15-year maturities but which had more moderate interest rate exposure. The fund remained focused on higher-quality securities. As of the end of the reporting period, approximately 72 percent of the fund's portfolio consisted of securities rated AA or better. We added selectively to the portfolio's holdings of bonds rated BBB or lower in situations where our analysts' research showed sufficiently compelling return opportunity. At the sector level, the fund remained well diversified across the major segments of the municipal market. At the end of the period, the three largest sectors represented in the portfolio were public education, general purpose and public building. There is no guarantee the security sectors mentioned will continue to perform well or be held by the fund in the future. 3
RATINGS ALLOCATIONS AS OF 3/31/05 AAA/Aaa 60.8% AA/Aa 11.0 A/A 11.5 BBB/Baa 8.9 B/B 0.1 Non-Rated 7.7 TOP 5 SECTORS AS OF 3/31/05 Public Education 17.9% General Purpose 13.9 Public Building 10.1 Higher Education 10.1 Health Care 9.6 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 03/31/05 Pennsylvania 11.4% New Jersey 10.1 Ohio 7.2 Missouri 6.9 California 5.3 Illinois 5.2 Florida 5.0 Colorado 4.8 Oregon 4.5 Alabama 4.0 New York 3.0 Texas 2.7 Michigan 2.7 Arizona 2.3 Indiana 2.1 Kansas 2.0 Arkansas 1.9 South Carolina 1.8 Tennessee 1.5 North Carolina 1.5 New Mexico 1.5 South Dakota 1.3 West Virginia 1.2 Connecticut 1.2 Kentucky 0.9 Rhode Island 0.9 Nebraska 0.9 Oklahoma 0.9 District of Columbia 0.9 Maryland 0.6 Wisconsin 0.4 Massachusetts 0.3 Georgia 0.3 Montana 0.3 Louisiana 0.1
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4
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 03/31/05 (continued from previous page) Minnesota 0.1 Utah -- ----- Total Long-Term Investments 97.7% Short Term Investments 2.8 Liabilities in Excess of Other Assets -0.5 ----- Total Net Assets 100.0%
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings allocations and sector percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Summary of investments by state classification are as a percentage of total net assets. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 5 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. 6 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities and information on how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 7 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales charge on redemptions of Class B and Class C Shares; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/1/04 - 3/31/05. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your cost would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* ------------------------------------------------- 10/1/04 3/31/05 10/1/04-3/31/05 Class A Actual..................................... $1,000.00 $1,008.05 $4.71 Hypothetical............................... 1,000.00 1,020.23 4.73 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,009.89 4.21 Hypothetical............................... 1,000.00 1,020.73 4.23 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,005.23 7.70 Hypothetical............................... 1,000.00 1,017.23 7.75 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.94%, 0.84%, and 1.54% for Class A, B, and C Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). These expense ratios reflect an expense waiver. Assumes all dividends and distributions were reinvested. 8 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- MUNICIPAL BONDS 97.7% ALABAMA 4.0% $1,260 Dothan Houston Cnty, AL Arpt Auth (AMT) (MBIA Insd) (a)....................................... 5.400% 12/01/15 $ 1,350,418 2,005 Greenville, AL Wts Rfdg (XLCA Insd) (a)......... 5.000 01/01/18 2,136,247 1,000 Jefferson Cnty, AL Ltd Oblig Ser A.............. 5.000 01/01/07 1,032,070 255 West Jefferson Cnty, AL Amusement & Pub Park Auth (Prerefunded @ 12/01/06)................... 7.500 12/01/08 269,953 ------------ 4,788,688 ------------ ARIZONA 2.3% 1,000 Arizona St Univ Rev Sys Rfdg (AMBAC Insd) (b)... 5.000 07/01/20 1,058,750 30 Maricopa Cnty, AZ Indl Dev Auth Sr Living Fac Rev Christian Care Mesa Inc Proj A.............. 7.250 04/01/05 30,000 1,000 Maricopa Cnty, AZ Uni Sch Impt Proj of 2002 Ser B (FSA Insd).................................... 5.250 07/01/16 1,093,770 570 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 596,106 ------------ 2,778,626 ------------ ARKANSAS 1.9% 1,000 Arkansas St Fed Hwy Grant Antic Ser A........... 5.500 08/01/06 1,036,450 1,200 University of Arkansas Rev UALR Cap Impt Ser B (FSA Insd)...................................... 4.500 12/01/19 1,220,184 ------------ 2,256,634 ------------ CALIFORNIA 5.3% 1,090 California Edl Fac Auth Rev Occidental College Ser A (MBIA Insd) (a) (b)....................... 5.000 10/01/20 1,156,294 135 California Edl Fac Auth Rev Pacific Grad Sch (a)............................................. 6.950 11/01/07 148,669 1,000 California St (AMBAC Insd) (c).................. 6.400 09/01/08 1,110,220 1,500 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).................................... 5.375 05/01/18 1,629,480 700 California Statewide Cmntys Dev Auth Rev Daughters of Charity Hlth Ser F................. 5.000 07/01/08 729,547 385 Fairfield Suisun, CA Uni Sch Election 2002 (MBIA Insd)........................................... 5.250 08/01/18 417,937 1,100 Santa Clara, CA Elec Rev Sub Ser A (MBIA Insd)........................................... 5.250 07/01/20 1,189,320 ------------ 6,381,467 ------------ COLORADO 4.8% 1,750 Adams & Arapahoe Cntys, CO Sch Dist 28 Ser C (Prerefunded @12/01/06)......................... 5.200 12/01/11 1,854,177 180 Colorado Hlth Fac Auth Rev Sr Living Fac Eaton Ter Ser A....................................... 6.800 07/01/09 186,638 1,560 Colorado Springs, CO Utils Rev Sys Sub Lien Impt Ser A........................................... 5.000 11/15/19 1,648,265 1,000 Denver, CO City & Cnty Arpt Rev Ser D Rfdg (AMT) (FSA Insd)...................................... 5.500 11/15/12 1,078,920
See Notes to Financial Statements 9 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- COLORADO (CONTINUED) $1,000 Weld & Adams Cntys, CO Sch Dist (FSA Insd)...... 5.000% 12/15/21 $ 1,055,410 ------------ 5,823,410 ------------ CONNECTICUT 1.2% 1,000 Connecticut St Hlth & Edl Fac Auth Rev Griffin Hosp Ser B (Radian Insd)........................ 5.000 07/01/11 1,057,020 145 Mashantucket Western Pequot Tribe, 144A--Private Placement (Escrowed to Maturity) (d)............ 6.500 09/01/06 152,781 260 New Haven, CT Indl Fac Rev Adj Govt Ctr Thermal Energies (AMT).................................. 7.250 07/01/09 260,445 ------------ 1,470,246 ------------ DISTRICT OF COLUMBIA 0.9% 1,000 District of Columbia Rev Friendship Pub Charter Sch Inc (ACA Insd) (a).......................... 5.000 06/01/13 1,043,170 ------------ FLORIDA 5.0% 1,000 Brevard Cnty, FL Sch Brd Ctfs Ser B Rfdg (FGIC Insd)........................................... 5.000 07/01/20 1,053,170 2,000 Broward Cnty, FL Arpt Sys Rev Ser E Rfdg (AMT) (MBIA Insd) (c)................................. 5.375 10/01/13 2,125,940 500 Highlands Cnty, FL Hlth Fac Hosp Adventist Hlth............................................ 3.350 11/15/32 501,520 190 Lee Cnty, FL Indl Dev Auth Econ Rev Encore Nursing Ctr Part Rfdg........................... 8.125 12/01/07 191,455 80 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg....................... 8.125 07/01/06 82,908 250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 272,097 1,500 Orange Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd)........................................... 5.250 08/01/14 1,637,490 210 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj Rfdg (Escrowed to Maturity)..................... 7.125 11/01/06 216,930 ------------ 6,081,510 ------------ GEORGIA 0.3% 300 Forsyth Cnty, GA Hosp Auth Rev Antic Ctfs GA Baptist Hlthcare Sys Proj (Escrowed to Maturity)....................................... 6.000 10/01/08 316,269 ------------ ILLINOIS 5.2% 100 Bedford Park, IL Tax Increment 71st & Cicero Proj Rfdg....................................... 7.000 01/01/06 101,164 1,325 Bedford Park, IL Wtr Rev Ser B (Escrowed to Maturity) (AMT) (ACA Insd)...................... 6.000 12/15/08 1,430,019 250 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A..................................... 6.500 12/01/05 256,092 545 Clay Cnty, IL Hosp Rev (a)...................... 5.500 12/01/10 542,340 99 Huntley, IL Spl Svc Area No 7 Spl Tax........... 6.000 03/01/09 99,000 1,010 Illinois Fin Auth Student Hsg Rev MJH Ed Assistance IV Sr Ser A (a)...................... 5.000 06/01/09 1,060,813
10 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $1,000 Illinois Fin Auth Student Hsg Rev MJH Ed Assistance IV Sr Ser A.......................... 5.500% 06/01/19 $ 1,054,000 500 Lincolnshire, IL Spl Svc Area Sedgebrook Proj... 5.000 03/01/11 515,330 180 Peoria, IL Spl Tax Weaverridge Spl Svc Area..... 7.625 02/01/08 187,117 1,000 Round Lake Beach, IL Tax........................ 4.650 12/15/13 1,004,050 ------------ 6,249,925 ------------ INDIANA 2.1% 1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg (AMBAC Insd).................................... 5.500 01/01/18 1,085,540 1,400 Indiana Bd Bk Spl Prog Hendricks Redev Ser B (Prerefunded @ 02/01/07)........................ 6.000 02/01/12 1,503,656 ------------ 2,589,196 ------------ KANSAS 2.0% 500 Burlington, KS Envrn Impt Rev................... 4.750 09/01/15 514,850 1,000 Shawnee Cnty, KS Sch Dist 501 Topeka............ 5.000 02/01/20 1,044,920 320 Wyandotte Cnty, KS City KS Univ Brd of Public Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/11 344,179 510 Wyandotte Cnty, KS City KS Univ Brd of Public Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/12 544,430 ------------ 2,448,379 ------------ KENTUCKY 0.9% 1,000 Louisville & Jefferson Cnty, KY Ser C (AMT) (FSA Insd)........................................... 5.500 07/01/17 1,081,450 ------------ LOUISIANA 0.1% 235 Louisiana Hsg Fin Agy Rev Multi-Family Hsg Plantation Ser A................................ 7.200 01/01/06 164,058 ------------ MARYLAND 0.6% 625 Maryland St Econ Dev Corp Univ MD College Park Proj............................................ 5.750 06/01/13 694,775 ------------ MASSACHUSETTS 0.3% 65 Massachusetts St Indl Fin Agy East Boston Neighborhood Proj............................... 7.250 07/01/06 64,875 245 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/1998, Cost $245,000) (e)............................................. 6.200 06/01/08 252,350 ------------ 317,225 ------------ MICHIGAN 2.7% 1,000 Brighton, MI Area Sch Dist Rfdg (a)............. 5.250 05/01/18 1,075,990 1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/20 1,072,650 335 John Tolfree Hlth Sys Corp MI Mtg Rev Rfdg...... 5.450 09/15/06 340,263 500 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser A (b)....................................... 5.000 07/01/09 520,625
See Notes to Financial Statements 11 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- MICHIGAN (CONTINUED) $ 250 Michigan St Strategic Fd Ltd Oblig United Waste Sys Proj (AMT).................................. 5.200% 04/01/10 $ 260,197 ------------ 3,269,725 ------------ MINNESOTA 0.1% 90 Minneapolis, MN Multi-Family Rev Hsg Belmont Apts Proj (AMT) (a)............................. 7.000 11/01/06 90,332 ------------ MISSOURI 6.9% 610 Ferguson, MO Tax Increment Rev Crossing at Halls Ferry Rfdg (a).................................. 5.500 04/01/14 628,099 1,350 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 1,415,907 1,000 Macon, MO Ctfs Partn (MBIA Insd)................ 5.250 08/01/17 1,064,570 830 Missouri St Dev Fin Brd Fac Rev Pub Safety Proj Ser A (a)....................................... 5.000 03/01/11 868,114 2,125 O' Fallon, MO Ctfs Partn (MBIA Insd) (a)........ 5.375 02/01/18 2,293,470 2,000 Saint Charles, MO Ctf Part Ser B................ 5.500 05/01/18 2,107,180 ------------ 8,377,340 ------------ MONTANA 0.3% 300 Crow Fin Auth, MT Tribal Purp Rev (Acquired 12/11/1997, Cost $300,000) (e).................. 5.400 10/01/07 311,505 ------------ NEBRASKA 0.9% 1,000 Dodge Cnty, NE Sch Dist 001 Rfdg (FSA Insd)..... 5.000 12/15/18 1,061,940 ------------ NEW JERSEY 10.1% 1,000 Casino Reinvestment Dev Auth NJ Hotel Room Fee Rev (AMBAC Insd)................................ 5.250 01/01/20 1,086,360 1,400 Essex Cnty, NJ Impt Auth Lease Gtd Cnty Correctional Fac Proj (Prerefunded @10/01/10) (FGIC Insd)..................................... 5.750 10/01/30 1,565,634 460 Middlesex Cnty, NJ Impt Auth Street Student Hsg Proj Ser A...................................... 2.500 08/15/06 455,556 1,005 Morris Union Jointure Cmnty NJ Ctfs Part (Radian Insd)........................................... 4.000 05/01/08 1,023,371 1,000 Morris Union Jointure Cmnty NJ Ctfs Part (Radian Insd)........................................... 5.250 05/01/20 1,058,560 265 New Jersey Econ Dev Auth First Mtg Winchester Ser A Rfdg...................................... 2.600 11/01/05 263,723 400 New Jersey Econ Dev Auth First Mtg Winchester Ser A Rfdg...................................... 3.000 11/01/06 395,772 1,500 New Jersey Econ Dev Auth Rev Cigarette Tax...... 5.500 06/15/16 1,626,915 800 New Jersey Hlthcare Fac Fin Auth Rev Christ Hosp Group Issue (Escrowed to Maturity) (Connie Lee Insd)........................................... 7.000 07/01/06 825,488 1,000 New Jersey Hlthcare Fac Fin Auth Rev St Clare's Hosp Inc Ser A Rfdg (Radian Insd)............... 5.250 07/01/20 1,053,070
12 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- NEW JERSEY (CONTINUED) $1,000 New Jersey Hlthcare Fac Fin Auth Rev Virtua Hlth Issue (FSA Insd)................................ 5.250% 07/01/10 $ 1,072,100 670 New Jersey St Edl Fac Auth Fairleigh Dickinson Univ Ser D (ACA Insd)........................... 5.000 07/01/05 673,786 455 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.500 02/15/16 497,229 565 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.600 02/15/17 619,410 ------------ 12,216,974 ------------ NEW MEXICO 1.5% 1,000 Jicarilla, NM Apache Nation Rev Ser A (Acquired 10/23/2003, Cost $1,020,380) (e)................ 5.500 09/01/23 1,055,200 700 Jicarilla, NM Apache Nation Rev Ser A (Acquired 10/23/2003, Cost $728,707) (e).................. 4.000 09/01/08 709,317 ------------ 1,764,517 ------------ NEW YORK 3.0% 245 Brookhaven, NY Indl Dev Agy Sr Residential Hsg Rev Woodcrest Estates Fac Ser A (AMT)........... 5.875 12/01/09 251,674 1,000 Long Island Pwr Auth NY Elec Gen Ser C.......... 5.500 09/01/17 1,082,120 750 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Proj Ser A............................ 6.250 03/01/15 760,650 480 New York City Ser A............................. 7.000 08/01/07 511,267 20 New York City Ser A (Prerefunded @ 08/01/06).... 7.000 08/01/07 21,427 5 Niagara Falls, NY Pub Impt (MBIA Insd).......... 6.900 03/01/20 5,067 1,000 Tobacco Settlement Fin Corp NY Ser C-1.......... 5.250 06/01/13 1,057,670 ------------ 3,689,875 ------------ NORTH CAROLINA 1.5% 630 North Carolina Eastn Mun Pwr Agy Pwr Sys Rev Ser D............................................... 6.450 01/01/14 697,454 1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 1,075,420 ------------ 1,772,874 ------------ OHIO 7.2% 500 Athens Cnty, OH Hosp Fac Rev & Impt O' Bleness Mem Ser A Rfdg.................................. 6.250 11/15/13 516,115 1,370 Cleveland, OH Non Tax Rev Cleveland Stadium Proj Rfdg (AMBAC Insd)............................... 5.125 12/01/20 1,458,105 60 Cleveland-Cuyahoga Cnty, OH Port Auth Rev Dev- Port Cleveland Bd Fd Ser B (AMT) (a)............ 6.500 05/15/05 60,172 500 Dayton, OH Spl Fac Rev Afco Cargo Day LLC Proj (AMT)........................................... 6.000 04/01/09 484,195 2,675 Ohio Mun Elec Generation Agy Jt Venture 5 Ctfs Ben Int Rfdg (AMBAC Insd)....................... 5.000 02/15/21 2,798,719 1,160 Sugarcreek, OH Loc Sch Dist Sch Impt Rfdg (MBIA Insd) (a)....................................... 5.250 12/01/18 1,255,978 1,010 Toledo, OH Swr Sys Rev (AMBAC Insd)............. 5.000 11/15/18 1,070,893 1,000 University of Cincinnati Gen Ser C (FGIC Insd)........................................... 5.000 06/01/18 1,057,600 ------------ 8,701,777 ------------
See Notes to Financial Statements 13 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- OKLAHOMA 0.9% $1,000 University of Oklahoma Rev Multiple Fac (MBIA Insd)..................................... 5.000% 06/01/19 $ 1,053,670 ------------ OREGON 4.5% 2,575 Emerald Peoples Util Dist OR Ser A Rfdg (FSA Insd) (a).................................. 5.250 11/01/16 2,802,913 1,485 Oregon St Dept Admin Svcs Lottery Rev Ser B (FSA Insd)........................................... 5.000 04/01/18 1,583,025 1,000 Port Morrow, OR Pollutn Ctl Portland Gen Ser A Rfdg...................................... 5.200 05/01/33 1,045,110 ------------ 5,431,048 ------------ PENNSYLVANIA 11.4% 250 Allegheny Cnty, PA Redev Auth Rev Pittsburgh Mills Proj...................................... 5.100 07/01/14 260,943 1,320 Canon McMillan Sch Dist PA Ser A Rfdg (MBIA Insd)..................................... 5.000 12/15/15 1,423,211 1,000 Erie, PA Ser A (FSA Insd)....................... 5.000 11/15/18 1,062,330 500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj....................... 6.000 02/01/21 508,265 1,000 Pennsylvania St High Edl Fac Auth Rev Univ PA Hlth Sys Ser A.................................. 5.000 08/15/08 1,046,150 1,300 Philadelphia, PA Gas Wks Rev Eighteenth Ser (AGC Insd)........................................... 5.250 08/01/18 1,377,116 900 Philadelphia, PA Gas Wks Rev Third Ser (FSA Insd)........................................... 5.000 08/01/10 966,843 2,000 Philadelphia, PA Redev Auth Rev Neighborhood Trans Ser A (FGIC Insd)......................... 5.500 04/15/16 2,189,480 1,500 Springfield, PA Sch Dist DE Ser A (FGIC Insd)... 5.000 03/15/20 1,580,190 1,090 Wilson, PA Area Sch Dist (FGIC Insd)............ 5.125 03/15/17 1,161,482 2,070 York Cnty, PA Sch Technology (FGIC Insd)........ 5.375 02/15/16 2,263,421 ------------ 13,839,431 ------------ RHODE ISLAND 0.9% 1,000 Rhode Island St Econ Dev Grant Antic RI Dept Trans Ser A (FSA Insd).......................... 5.000 06/15/15 1,074,370 ------------ SOUTH CAROLINA 1.8% 1,020 Berkeley Cnty, SC Impt & Rfdg (FSA Insd)........ 5.000 09/01/17 1,084,750 1,065 Lexington, SC Wtr & Swr Rev & Impt Comb Ser A Rfdg (MBIA Insd) (a)............................ 5.000 04/01/14 1,132,276 ------------ 2,217,026 ------------ SOUTH DAKOTA 1.3% 1,515 Minnehaha Cnty, SD Ctfs Ltd Tax (FSA Insd)...... 5.000 12/01/18 1,606,718 ------------
14 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ------------------------------------------------------------------------------------------- TENNESSEE 1.5% $1,050 Franklin, TN Spl Sch Dist Cap Apprec (FSA Insd)........................................... * 06/01/15 $ 674,562 1,000 Gatlinburg, TN Pub Bldg Auth Rfdg (AMBAC Insd)........................................... 5.750% 12/01/11 1,122,780 ------------ 1,797,342 ------------ TEXAS 2.7% 740 Austin, TX Util Sys Rev Comb Ser A Rfdg (MBIA Insd)........................................... 5.375 11/15/05 742,605 395 Brazos River Auth TX Pollutn Ctl Rev Adj TXU Elec Co Proj Ser C Rfdg (AMT)................... 5.750 05/01/36 420,304 500 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc Proj............................................ 5.000 08/15/13 502,350 350 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc Proj............................................ 5.000 08/15/19 341,054 1,000 Lower Colorado Riv Auth TX LCRA Svcs Corp Proj Rfdg (FGIC Insd)................................ 5.000 05/15/17 1,044,670 300 San Antonio, TX Hsg Fin Corp Multi-Family Hsg Rev Beverly Oaks Apt Proj Ser A (a)............. 7.500 02/01/10 284,688 ------------ 3,335,671 ------------ UTAH 0.0% 45 Utah St Hsg Fin Agy Single Family Mtg Mezz Ser A (AMT) (FHA/VA Gtd).............................. 7.150 07/01/12 45,958 ------------ WEST VIRGINIA 1.2% 1,500 West Virginia St Hosp Fin Auth (MBIA Insd)...... 6.100 01/01/18 1,503,765 ------------ WISCONSIN 0.4% 500 Wisconsin St Hlth & Edl Fac Beaver Dam Cmnty Hosp Inc........................................ 5.500 08/15/14 489,480 ------------ TOTAL LONG-TERM INVESTMENTS 97.7% (Cost $116,418,898)....................................................... 118,136,366 SHORT-TERM INVESTMENTS 2.8% (Cost $3,400,000)......................................................... 3,400,000 ------------ TOTAL INVESTMENTS 100.5% (Cost $119,818,898)....................................................... 121,536,366 LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%)............................... (604,885) ------------ NET ASSETS 100.0%.......................................................... $120,931,481 ============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) The Fund owns 100% of the bond issuance. (b) Securities purchased on a when-issued or delayed delivery basis. See Notes to Financial Statements 15 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued (c) All or a portion of these securities have been physically segregated in connection with open futures contracts. (d) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (e) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 1.9% of net assets. ACA--American Capital Access AGC--AGC Insured Custody Certificates AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FHA/VA--Federal Housing Administration/Department of Veterans Affairs FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. Radian--Radian Asset Assurance XLCA--XL Capital Assurance Inc. 16 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2005 (Unaudited) ASSETS: Total Investments (Cost $119,818,898)....................... $121,536,366 Cash........................................................ 10,547 Receivables: Interest.................................................. 1,617,873 Investments Sold.......................................... 1,067,480 Fund Shares Sold.......................................... 276,213 Other....................................................... 119,996 ------------ Total Assets............................................ 124,628,475 ------------ LIABILITIES: Payables: Investments Purchased..................................... 2,742,996 Fund Shares Repurchased................................... 391,432 Distributor and Affiliates................................ 113,457 Income Distributions...................................... 108,956 Variation Margin on Futures............................... 72,437 Investment Advisory Fee................................... 41,379 Trustees' Deferred Compensation and Retirement Plans........ 169,740 Accrued Expenses............................................ 56,597 ------------ Total Liabilities....................................... 3,696,994 ------------ NET ASSETS.................................................. $120,931,481 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $118,610,932 Net Unrealized Appreciation................................. 1,863,363 Accumulated Net Realized Gain............................... 275,559 Accumulated Undistributed Net Investment Income............. 181,627 ------------ NET ASSETS.................................................. $120,931,481 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $86,469,850 and 8,147,172 shares of beneficial interest issued and outstanding)............. $ 10.61 Maximum sales charge (3.25%* of offering price)......... .36 ------------ Maximum offering price to public........................ $ 10.97 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $18,256,423 and 1,708,862 shares of beneficial interest issued and outstanding)............. $ 10.68 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $16,205,208 and 1,529,011 shares of beneficial interest issued and outstanding)............. $ 10.60 ============
* On sales of $25,000 or more, the sales charge will be reduced. See Notes to Financial Statements 17 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2005 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 2,628,447 ----------- EXPENSES: Investment Advisory Fee..................................... 303,400 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $105,993, $14,922 and $71,593, respectively)............................................. 192,508 Shareholder Services........................................ 33,530 Registration and Filing Fees................................ 30,627 Legal....................................................... 21,358 Trustees' Fees and Related Expenses......................... 11,214 Custody..................................................... 5,948 Other....................................................... 72,235 ----------- Total Expenses.......................................... 670,820 Investment Advisory Fee Reduction....................... 60,680 Less Credits Earned on Cash Balances.................... 1,288 ----------- Net Expenses............................................ 608,852 ----------- NET INVESTMENT INCOME....................................... $ 2,019,595 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 72,001 Futures................................................... 295,272 ----------- Net Realized Gain........................................... 367,273 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 3,336,877 End of the Period: Investments............................................. 1,717,468 Futures................................................. 145,895 ----------- 1,863,363 ----------- Net Unrealized Depreciation During the Period............... (1,473,514) ----------- NET REALIZED AND UNREALIZED LOSS............................ $(1,106,241) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 913,354 ===========
18 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, 2005 SEPTEMBER 30, 2004 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 2,019,595 $ 3,767,410 Net Realized Gain/Loss............................... 367,273 (116,827) Net Unrealized Appreciation/Depreciation During the Period............................................. (1,473,514) 436,427 ------------ ------------ Change in Net Assets from Operations................. 913,354 4,087,010 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (1,450,168) (2,540,540) Class B Shares..................................... (260,960) (599,449) Class C Shares..................................... (225,906) (538,322) ------------ ------------ (1,937,034) (3,678,311) ------------ ------------ Distributions from Net Realized Gain: Class A Shares..................................... (111,173) (559,167) Class B Shares..................................... (25,082) (168,772) Class C Shares..................................... (21,027) (151,088) ------------ ------------ (157,282) (879,027) ------------ ------------ Total Distributions.................................. (2,094,316) (4,557,338) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... (1,180,962) (470,328) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 22,529,535 35,464,587 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 1,514,215 3,315,608 Cost of Shares Repurchased........................... (16,831,431) (38,885,321) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 7,212,319 (105,126) ------------ ------------ TOTAL INCREASE/DECREASE IN NET ASSETS................ 6,031,357 (575,454) NET ASSETS: Beginning of the Period.............................. 114,900,124 115,475,578 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $181,627 and $99,066, respectively)............................. $120,931,481 $114,900,124 ============ ============
See Notes to Financial Statements 19 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, -------------------------------------------- 2005 2004 2003 2002 (b) 2001 2000 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................... $10.72 $10.76 $10.86 $10.42 $10.14 $10.22 ------ ------ ------ ------ ------ ------ Net Investment Income.................... .18 .37 .38 .42 .49 .46 Net Realized and Unrealized Gain/Loss.... (.10) .04 (.03) .44 .23 (.05) ------ ------ ------ ------ ------ ------ Total from Investment Operations.......... .08 .41 .35 .86 .72 .41 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income................................. .18 .37 .40 .42 .43 .49 Distributions from Net Realized Gain..... .01 .08 .05 -0- .01 -0- ------ ------ ------ ------ ------ ------ Total Distributions....................... .19 .45 .45 .42 .44 .49 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........ $10.61 $10.72 $10.76 $10.86 $10.42 $10.14 ====== ====== ====== ====== ====== ====== Total Return* (a)......................... 0.81%** 3.84% 3.33% 8.48% 7.19% 4.13% Net Assets at End of the Period (In millions)................................ $ 86.5 $ 76.5 $ 70.1 $ 53.5 $ 29.1 $ 26.6 Ratio of Expenses to Average Net Assets*.................................. .94% .93% .84% .85% .77% 1.44% Ratio of Net Investment Income to Average Net Assets*.............................. 3.39% 3.50% 3.55% 4.08% 4.78% 4.65% Portfolio Turnover........................ 26%** 60% 35% 75% 106% 85% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets................................ 1.04% 1.03% 1.04% 1.14% 1.23% N/A Ratio of Net Investment Income to Average Net Assets.................... 3.29% 3.40% 3.35% 3.79% 4.32% N/A ** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 3.25% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 0.50% may be imposed on certain redemptions made within eighteen months of purchase. With respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. N/A=Not Applicable 20 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, -------------------------------------------------------- 2005 2004 2003 2002 (b) 2001 2000 ------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD............................... $10.75 $10.78 $10.84 $10.41 $10.13 $10.20 ------ ------ ------ ------ ------ ------ Net Investment Income................ .18 .30 .32 .35 .42 .38 Net Realized and Unrealized Gain/Loss.......................... (.10) .04 (.01) .42 .22 (.04) ------ ------ ------ ------ ------ ------ Total from Investment Operations....... .08 .34 .31 .77 .64 .34 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............................. .14 .29 .32 .34 .35 .41 Distributions from Net Realized Gain............................... .01 .08 .05 -0- .01 -0- ------ ------ ------ ------ ------ ------ Total Distributions.................... .15 .37 .37 .34 .36 .41 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD..... $10.68 $10.75 $10.78 $10.84 $10.41 $10.13 ====== ====== ====== ====== ====== ====== Total Return* (a)...................... 0.99%**(d) 3.15%(d) 2.96%(c) 7.61% 6.42% 3.46% Net Assets at End of the Period (In millions)............................ $ 18.3 $ 20.3 $ 23.9 $ 17.1 $ 11.1 $ 8.6 Ratio of Expenses to Average Net Assets*.............................. .84%(d) 1.67%(d) 1.59% 1.60% 1.52% 2.20% Ratio of Net Investment Income to Average Net Assets*.................. 3.50%(d) 2.76%(d) 3.08%(c) 3.34% 4.02% 3.90% Portfolio Turnover..................... 26%** 60% 35% 75% 106% 85% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets............................ .94%(d) 1.77%(d) 1.79% 1.89% 1.98% N/A Ratio of Net Investment Income to Average Net Assets................ 3.40%(d) 2.66%(d) 2.88%(c) 3.05% 3.56% N/A ** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 3%, charged on certain redemptions made within one year of purchase and declining to 0% after the fourth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (c) Certain non-recurring payments were made to Class B Shares, resulting in an increase to the Ratio of Net Investment Income to Average Net Assets and Total Return of .28%. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See footnote 6). N/A=Not Applicable. See Notes to Financial Statements 21 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, -------------------------------------------------------- 2005 2004 2003 2002 (b) 2001 2000 ------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $10.70 $10.73 $10.82 $10.40 $10.12 $10.20 ------ ------ ------ ------ ------ ------ Net Investment Income................. .15 .30 .30 .34 .42 .39 Net Realized and Unrealized Gain/Loss........................... (.10) .04 (.02) .42 .22 (.06) ------ ------ ------ ------ ------ ------ Total from Investment Operations....... .05 .34 .28 .76 .64 .33 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.............................. .14 .29 .32 .34 .35 .41 Distributions from Net Realized Gain................................ .01 .08 .05 -0- .01 -0- ------ ------ ------ ------ ------ ------ Total Distributions.................... .15 .37 .37 .34 .36 .41 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD..... $10.60 $10.70 $10.73 $10.82 $10.40 $10.12 ====== ====== ====== ====== ====== ====== Total Return* (a)...................... 0.52%**(d) 3.17%(d) 2.69%(c) 7.52% 6.42% 3.36% Net Assets at End of the Period (In millions)............................. $ 16.2 $ 18.1 $ 21.4 $ 13.2 $ 8.6 $ 6.4 Ratio of Expenses to Average Net Assets*............................... 1.54%(d) 1.66%(d) 1.59% 1.60% 1.52% 2.20% Ratio of Net Investment Income to Average Net Assets*................... 2.80%(d) 2.77%(d) 2.84%(c) 3.33% 4.02% 3.90% Portfolio Turnover..................... 26%** 60% 35% 75% 106% 85% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets............................. 1.64%(d) 1.76%(d) 1.79% 1.89% 1.98% N/A Ratio of Net Investment Income to Average Net Assets................. 2.70%(d) 2.67%(d) 2.64%(c) 3.04% 3.56% N/A ** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Ratio of Net Investment Income to Average Net Assets and Total Return of .06%. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See footnote 6). N/A=Not Applicable. 22 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Intermediate Term Municipal Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust (the "Trust"), a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors with a high level of current income exempt from federal income tax, consistent with preservation of capital. The Fund commenced investment operations on May 28, 1993 with two classes of common shares, Class A and Class B shares. The distribution of the Fund's Class C shares commenced on October 19, 1993. The Fund registered Class I Shares on December 30, 2004. There were no sales of Class I Shares for the period ended March 31, 2005. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Legal expenditures that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. Purchasing securities on this basis involves a risk that the market value at the time of delivery may be lower than the agreed upon purchase price resulting in an unrealized loss. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2005, the Fund has $2,742,996 of when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. 23 D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, if any, to its shareholders. Therefore, no provision for federal income taxes is required. At March 31, 2005, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $119,774,141 ============ Gross tax unrealized appreciation........................... $ 2,212,527 Gross tax unrealized depreciation........................... (512,766) ------------ Net tax unrealized appreciation on investments.............. $ 1,699,761 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short term capital gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2004 was as follows: Distributions paid from: Ordinary Income........................................... $444,464 Long Term Capital Gain.................................... 437,594 -------- $882,058 ========
As of September 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $157,502
F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's custody fee was reduced by $1,288 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
For the six months ended March 31, 2005, the Adviser waived $60,680 of its investment advisory fee. This represents an annualized rate of .10% of its average daily net assets. This waiver is voluntary in nature and can be discontinued at the Adviser's discretion. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $7,300 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide services as legal counsel to the Fund. 24 Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $23,100 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $25,400, representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are also officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund, and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of approximately $106,200 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2005. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 3. CAPITAL TRANSACTIONS At March 31, 2005, capital aggregated $85,693,034, $17,221,547 and $15,696,351 for Classes A, B and C, respectively. For the six months ended March 31, 2005, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 1,918,549 $ 20,603,448 Class B................................................... 79,030 854,656 Class C................................................... 99,772 1,071,431 ---------- ------------ Total Sales................................................. 2,097,351 $ 22,529,535 ========== ============ Dividend Reinvestment: Class A................................................... 111,216 $ 1,191,829 Class B................................................... 15,931 171,757 Class C................................................... 14,077 150,629 ---------- ------------ Total Dividend Reinvestment................................. 141,224 $ 1,514,215 ========== ============ Repurchases: Class A................................................... (1,014,447) $(10,891,952) Class B................................................... (279,101) (3,010,916) Class C................................................... (273,989) (2,928,563) ---------- ------------ Total Repurchases........................................... (1,567,537) $(16,831,431) ========== ============
25 At September 30, 2004, capital aggregated $74,789,709, $19,206,050 and $17,402,854 for Classes A, B and C, respectively. For the year ended September 30, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 2,439,175 $ 26,096,448 Class B................................................... 442,461 4,732,358 Class C................................................... 433,331 4,635,781 ---------- ------------ Total Sales................................................. 3,314,967 $ 35,464,587 ========== ============ Dividend Reinvestment: Class A................................................... 228,163 $ 2,436,459 Class B................................................... 42,299 453,007 Class C................................................... 39,974 426,142 ---------- ------------ Total Dividend Reinvestment................................. 310,436 $ 3,315,608 ========== ============ Repurchases: Class A................................................... (2,054,862) $(21,954,065) Class B................................................... (808,689) (8,651,743) Class C................................................... (781,197) (8,279,513) ---------- ------------ Total Repurchases........................................... (3,644,748) $(38,885,321) ========== ============
Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received thereon, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received thereon, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2005 and the year ended September 30, 2004, 82,098 and 36,615 Class B Shares converted to Class A Shares and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received thereon, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2005 and the year ended September 30, 2004, 61,678 and 0 Class C Shares converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class C Shares. Class B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be 26 imposed on most redemptions made within four years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
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
Class B Shares purchased on or after June 1, 2005 are subject to the following CDSC schedule:
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE YEAR SINCE PURCHASE ------------------- First....................................................... 4.00% Second...................................................... 4.00% Third....................................................... 3.00% Fourth...................................................... 2.50% Fifth....................................................... 1.50% Sixth and After............................................. 0.00%
For the six months ended March 31, 2005, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $10,000 and CDSC on redeemed shares of approximately $21,100. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $37,046,404 and $30,158,479 respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In these instances, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. 27 During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Securities and typically closes the contract prior to delivery date. These contracts are generally used to manage the Fund's effective maturity and duration. Upon entering into futures contracts, the Fund maintains, an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated in the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2005, were as follows:
CONTRACTS Outstanding at September 30, 2004........................... 157 Futures Opened.............................................. 466 Futures Closed.............................................. (425) ---- Outstanding at March 31, 2005............................... 198 ====
The futures contracts outstanding as of March 31, 2005, and the description and unrealized appreciation/depreciation were as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 2-Year Futures June 2005 (Current Notional Value of $206,891 per contract)................ 64 $ 41,744 U.S. Treasury Notes 5-Year Futures June 2005 (Current Notional Value of $107,094 per contract)................ 134 104,151 --- -------- 198 $145,895 === ========
6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares, and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets are accrued daily. The annual fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. At March 31, 2005, there were no distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") for Class B and Class C shares, respectively. Any unreimbursed receivable may be recovered from future 28 payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in these fees for the ended, are payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $16,400. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. The consolidated action also names as defendants certain individual Trustees and Directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of certain Van Kampen funds; the named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of proprietary mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with the consolidated complaint described in the preceding paragraph. Plaintiff has sought leave to file second amended derivative complaint that alleges that the Adviser permitted or recklessly disregarded market timing and later trading in its proprietary mutual funds in order to increase assets under management and fees. However, pursuant to an agreement between the parties, the plaintiff's proposed second amended derivative complaint was withdrawn and the allegations regarding market timing and late trading asserted therein were filed in a separate complaint and coordinated with other cases related to market timing that have been centralized in a federal court. The defendants have moved to dismiss these actions and otherwise intend to defend them vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 8. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 29 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* - President and Chief Executive Officer JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 30 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 138, 338, 538 INF SAR 5/05 RN05-01079P-Y03/05 (VAN KAMPEN INVESTMENTS LOGO) Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen New York Tax Free Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2005. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/05
A SHARES B SHARES C SHARES 7/29/94 7/29/94 7/29/94 --------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES Since Inception 6.41% 5.93% 5.90% 5.90% 5.69% 5.69% 10-year 6.38 5.87 5.83 5.83 5.61 5.61 5-year 6.82 5.79 6.03 5.79 6.05 6.05 1-year 2.74 -2.16 1.98 -1.98 2.04 1.05 6-months 0.67 -4.12 0.30 -3.65 0.36 -0.63 --------------------------------------------------------------------------------------------- 30-Day SEC Subsidized Yield 3.16% 2.57% 2.57% --------------------------------------------------------------------------------------------- 30-Day SEC Yield 2.92% 2.32% 2.32%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect its conversion into Class A shares seven years after purchase. The since inception returns for Class C shares reflects the conversion of Class C shares into Class A shares ten years after purchase. See footnote 3 in the Notes to Financial Statements for additional information. Figures shown above assume reinvestment of all dividends and capital gains. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. The subsidized SEC yields reflect some or all of the expenses that the adviser had voluntarily waived. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005 Van Kampen New York Tax Free Income Fund is managed by the Adviser's Municipal Fixed Income team.(1) Members of the team include Dennis S. Pietrzak and John R. Reynoldson, Executive Directors of the Adviser; and Timothy D. Haney, Vice President of the Adviser. MARKET CONDITIONS The six-month period ended March 31, 2005, was characterized by continued short-term interest rate increases, and the specter of rising inflation resulting from record-high crude oil prices. The Federal Open Market Committee (the "Fed") raised the federal funds target rate 100 basis points during the period through a series of four, "measured" 0.25 percent tightenings to 2.75 percent by the end of March. Although rates in the short and intermediate areas of the yield curve shifted upward as the Fed tightened, long-term interest rates fell as buyers did not seem deterred by the prospect of rising inflation. As a result, the yield curve (the difference between short and longer-term yields) flattened and the long end of the municipal market handily outperformed the shorter end. The municipal market posted positive overall returns during the period, though it was not uniformly strong. In contrast to the strong showing by longer-term bonds, shorter-term municipals were hampered by the Fed's tightening and turned in a slightly negative showing. Within the investment-grade segment of the market, yield differentials between BBB-rated municipals and AAA-rated securities were flat to slightly wider, though BBB-rated securities still outperformed high grades due to their higher coupons, while securities rated below investment grade strongly outperformed as investors sought out their higher yields. The Fed's interest rate hikes did not dampen investors' appetites for municipal bonds, as net inflows into municipal bond funds topped $700 million during the period. The supply of new issues was modest during the closing months of 2004 (the first half of the period) before soaring in the opening months of 2005 as long-term issuers rushed to bring securities to market in anticipation of additional interest rate increases in the near term. New York continued to be one of the most active markets in the nation for new issuance during the period, although economic conditions were not uniformly strong. New York's economy continued to improve, and its credit rating was upgraded thanks to a guardedly optimistic outlook for New York City's fiscal health. The city continued to issue Liberty bonds to fund reconstruction efforts at the site of the World Trade Center. By contrast, the northern part of the state continued to struggle economically. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The fund returned 0.67 percent for the six months ended March 31, 2005 (Class A shares, unadjusted for sales charge). In comparison, the fund's benchmark index, the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period. TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
---------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 0.67% 0.30% 0.36% 1.21% ----------------------------------------------------------------
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND INDEX DEFINITIONS. One of our key strategies in managing the fund was to position it for rising interest rates. This approach was largely the result of our analysis of interest rates, which remained relatively low by historical standards even after rising from their multi-decade lows earlier. We effected this positioning in two ways. First, we kept the fund's duration (a measure of interest-rate sensitivity) below that of its benchmark. Second, to limit the fund's exposure to areas of the market that would be most likely susceptible to rising rates, we also trimmed the fund's shorter-maturity bonds. We reinvested the proceeds from those sales into bonds with premium coupons and maturities between 25 and 30 years. In addition to offering relatively attractive income streams, these securities positioned the fund to benefit from any future flattening of the yield curve. We kept the fund's exposure well diversified across the major sectors of the New York municipal market. Much of our relative-value trading activity was focused on selling issues that had been pre-refunded and purchasing more attractive securities in sectors such as water and sewer and public education. The fund remained focused on investment-grade securities, with more than 97 percent of the portfolio rated BBB or higher at the end of the period. There is no guarantee the security sectors mentioned will continue to perform well or be held by the fund in the future. 3 TOP 5 SECTORS AS OF 3/31/05 RATINGS ALLOCATIONS AS OF 3/31/05 General Purpose 21.7% AAA/Aaa 51.1% Higher Education 20.0 AA/Aa 27.5 Public Education 9.6 A/A 14.4 Water & Sewer 8.4 BBB/Baa 4.0 Health Care 8.2 NR 3.0
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. All percentages are as a percentage of total investments. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 4 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. 5 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities and information on how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 6 Expense Example As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/01/04 - 03/31/05. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, and $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds that have transactional costs, such as sales charges (loads), and redemption fees, or exchange fees.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* -------------------------------------------------- 10/1/04 3/31/05 10/01/04-3/31/05 Class A Actual.................................... $1,000.00 $1,006.69 $3.65 Hypothetical.............................. 1,000.00 1,021.33 3.68 (5% annual return before expenses) Class B Actual.................................... 1,000.00 1,003.00 7.39 Hypothetical.............................. 1,000.00 1,017.53 7.44 (5% annual return before expenses) Class C Actual.................................... 1,000.00 1,003.60 7.04 Hypothetical.............................. 1,000.00 1,017.93 7.09 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.73%, 1.48%, and 1.41% for Class A, B, and C Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). These ratios reflect an expense cap. Assumes all dividends and distributions were reinvested. 7 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- MUNICIPAL BONDS 97.2% NEW YORK 96.2% $1,290 Albany Cnty, NY Indl Dev Agy Indl Dev Rev Albany College of Pharmacy Ser A............ 5.625% 12/01/34 $ 1,341,974 330 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van Allen Proj Ser A............................ 6.875 06/01/39 309,853 1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City of Buffalo Proj (FSA Insd).................. 5.750 05/01/21 1,388,612 1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City of Buffalo Proj (FSA Insd).................. 5.750 05/01/22 1,388,612 1,250 Hempstead Town, NY Indl Dev Adelphi Univ Civic Fac................................... 5.750 06/01/22 1,363,512 500 Islip, NY Cmnty Dev Agy Cmnty Dev Rev NY Institute of Technology Rfdg (Prerefunded @ 03/01/06)................................... 7.500 03/01/26 531,670 1,290 Islip, NY Res Recovery Agy Res 1985 Fac Ser E (AMT) (FSA Insd).......................... 5.750 07/01/22 1,416,794 1,250 Long Island Pwr Auth NY Elec Sys Rev Gen Ser A (AMBAC Insd).............................. 5.500 12/01/09 1,365,325 2,000 Long Island Pwr Auth NY Elec Sys Rev Gen Ser C........................................... 5.500 09/01/19 2,158,380 1,000 Metropolitan Trans Auth NY Rev Ser A Rfdg (AMBAC Insd)................................ 5.500 11/15/19 1,104,920 1,000 Metropolitan Trans Auth NY Svc Contract Ser A Rfdg...................................... 5.125 01/01/29 1,029,810 1,000 Monroe Cnty, NY Indl Dev Agy Nazareth College Rochester Proj (MBIA Insd).......... 5.250 10/01/21 1,062,660 1,155 Monroe Cnty, NY Indl Dev Agy Saint John Fisher College Proj (Radian Insd) (c)....... 5.375 06/01/09 1,239,061 1,320 Montgomery Cnty, NY Indl Dev Agy Lease HFM Boces Ser A (XLCA Insd)..................... 5.000 07/01/34 1,353,317 295 Nassau Cnty, NY Interim Fin Auth Sales Tax Secd Ser A1 (AMBAC Insd).................... 5.375 11/15/16 322,777 750 Nassau Cnty, NY Swr & Storm Wtr Fin Auth Sys Rev Ser B (MBIA Insd)....................... 5.000 10/01/19 793,890 470 Nassau Cnty, NY Swr & Storm Wtr Fin Auth Sys Rev Ser B (MBIA Insd)....................... 5.000 10/01/23 491,517 2,425 New York City Fiscal 2003 Ser I............. 5.750 03/01/15 2,683,578 1,500 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (FSA Insd)............................ 5.500 02/15/18 1,637,250 1,000 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (FSA Insd)............................ 5.500 02/15/19 1,091,500 1,000 New York City Hsg Dev Corp Ser A (AMT)...... 5.500 11/01/34 1,019,020 475 New York City Indl Dev Agy Civic Fac Rev Cmnty Res Developmentally Disabled.......... 7.500 08/01/26 483,688 500 New York City Indl Dev Agy Civic Fac Rev College of New Rochelle Proj................ 5.750 09/01/17 524,120
8 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 500 New York City Indl Dev Agy Civic Fac Rev YMCA Greater NY Proj........................ 6.000% 08/01/07 $ 532,000 1,015 New York City Indl Dev Agy Fac Rev Royal Charter-NY Presbyterian (FSA Insd).......... 5.250 12/15/11 1,113,871 1,405 New York City Indl Dev Agy Fac Rev Royal Charter-NY Presbyterian (FSA Insd).......... 5.375 12/15/16 1,546,273 500 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Proj Ser A.................. 6.250 03/01/15 507,100 500 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Proj Ser A.................. 6.500 03/01/35 510,835 1,440 New York City Indl Dev Agy Spl Fac Rev Terminal One Group Assn Proj (AMT).......... 6.100 01/01/09 1,454,083 500 New York City Muni Wtr Fin Ser B............ 6.000 06/15/33 565,045 825 New York City Muni Wtr Fin Ser B (Prerefunded @ 06/15/10).................... 6.000 06/15/33 938,165 2,500 New York City Ser A......................... 5.500 08/01/20 2,687,250 1,000 New York City Ser A Rfdg.................... 5.250 03/15/14 1,082,490 1,000 New York City Ser A Rfdg.................... 5.250 03/15/15 1,079,780 1,000 New York City Ser B (MBIA Insd)............. 5.875 08/01/15 1,117,970 2,390 New York City Ser G......................... 5.000 12/01/28 2,447,838 1,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser A Rfdg (a).............. 5.500/14.000 11/01/26 1,095,900 1,500 New York City Transitional Fin Auth Rev Future Tax Secd Ser C (AMBAC Insd).......... 5.250 08/01/21 1,609,395 1,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser D (MBIA Insd)........... 5.250 02/01/19 1,075,770 1,540 New York City Transitional Future Tax Secd Ser B....................................... 5.500 02/01/15 1,685,653 2,000 New York St Dorm Auth Lease Rev Court Fac Ser A....................................... 5.500 05/15/20 2,149,480 510 New York St Dorm Auth Lease Rev Insd St Judicial Inst At Pace (AMBAC Insd).......... 5.500 07/01/09 555,074 1,060 New York St Dorm Auth Lease Rev Master Boces Pgm (FSA Insd).............................. 5.250 08/15/22 1,138,058 1,500 New York St Dorm Auth Lease Rev Muni Hlth Fac Impt Pgm Ser 1 (FSA Insd)............... 5.500 01/15/14 1,640,655 1,000 New York St Dorm Auth Lease Rev St Univ Dorm Fac (Prerefunded @ 07/01/12)................ 5.375 07/01/16 1,074,330 1,000 New York St Dorm Auth Rev City Univ Cons Third Ser 1 (FGIC Insd)..................... 5.250 07/01/25 1,051,780 1,230 New York St Dorm Auth Rev City Univ Ser D Rfdg (FSA Insd)............................. 5.750 07/01/12 1,370,687 750 New York St Dorm Auth Rev City Univ Sys Cons Ser A....................................... 5.625 07/01/16 843,915 1,000 New York St Dorm Auth Rev City Univ Sys Cons Ser B....................................... 6.000 07/01/14 1,127,560
See Notes to Financial Statements 9 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,890 New York St Dorm Auth Rev Dept Ed........... 5.250% 07/01/21 $ 2,002,757 1,000 New York St Dorm Auth Rev Insd Brooklyn Law Sch Ser B (XLCA Insd)....................... 5.375 07/01/23 1,086,010 1,000 New York St Dorm Auth Rev Insd NY Univ Ser 2 (AMBAC Insd)................................ 5.000 07/01/41 1,017,370 1,055 New York St Dorm Auth Rev Insd NY St Rehab Assn Ser A (AMBAC Insd)..................... 5.500 07/01/13 1,165,575 1,040 New York St Dorm Auth Rev Insd NY St Rehab Assn Ser A (AMBAC Insd)..................... 5.500 07/01/15 1,138,353 1,500 New York St Dorm Auth Rev Mem Sloan- Kettering Ctr Ser 1 (MBIA Insd)............. 5.000 07/01/20 1,571,115 415 New York St Dorm Auth Rev Mental Hlth Svcs Ser B (MBIA Insd)........................... 5.250 08/15/31 433,808 190 New York St Dorm Auth Rev Mental Hlth Svcs Ser B (Prerefunded @ 08/15/11) (MBIA Insd)....................................... 5.250 08/15/31 207,984 1,200 New York St Dorm Auth Rev Miriam Osborn Mem Home Ser B (ACA Insd)....................... 6.375 07/01/29 1,309,200 750 New York St Dorm Auth Rev Nursing Home Menorah Campus (FHA Gtd).................... 5.950 02/01/17 787,388 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser C (MBIA Insd)........................... 5.250 10/01/16 1,086,720 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser D (MBIA Insd)........................... 5.500 10/01/17 1,104,890 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser I (MBIA Insd)........................... 5.750 10/01/18 1,123,100 1,000 New York St Dorm Auth Rev Secd Hosp North Gen Hosp Rfdg (MBIA Insd)................... 5.750 02/15/17 1,106,110 1,000 New York St Dorm Auth Rev Secd Hosp North Gen Hosp Rfdg............................... 5.750 02/15/18 1,094,170 1,000 New York St Dorm Auth Rev Second Hosp Interfaith Med Cent Ser D (FSA Insd)........ 5.750 02/15/08 1,069,260 1,000 New York St Dorm Auth Rev St Univ Ed Fac 1989 Res (MBIA Insd)........................ 6.000 05/15/15 1,124,380 1,140 New York St Dorm Auth Rev St Univ Ed Fac Ser A (FSA Insd)................................ 5.875 05/15/17 1,322,833 1,000 New York St Dorm Auth Rev St Univ Ed Fac Ser A........................................... 5.250 05/15/21 1,091,180 1,665 New York St Dorm Auth Rev St Univ Ed Fac Ser B (FSA Insd)................................ 5.250 05/15/13 1,834,114 500 New York St Energy Resh & Dev Auth Gas Fac Rev Brooklyn Union Gas Ser B (Inverse Fltg) (AMT) (b)................................... 11.592 07/01/26 563,555 2,500 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds...................... 5.000 06/15/21 2,637,275 1,890 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds Ser B................ 5.000 12/15/21 1,981,967
10 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,000 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds Pooled Fin Pgm I..... 5.250% 09/15/19 $ 1,085,180 1,250 New York St Hsg Fin Agy St Econ Dev Hsg Ser A (FGIC Insd)............................... 5.000 09/15/34 1,286,325 1,000 New York St Hsg Fin Agy St Personal Income Tax Rev Econ Dev & Hsg Ser A................ 5.250 09/15/19 1,068,820 2,280 New York St Loc Govt Assist Corp Ser E Rfdg........................................ 6.000 04/01/14 2,622,752 1,000 New York St Mtg Agy Rev Homeowner Mtg Ser 71 (AMT)....................................... 5.400 04/01/29 1,017,590 870 New York St Mtg Agy Rev Homeowner Mtg Ser 82 (AMT)....................................... 5.650 04/01/30 895,883 995 New York St Mtg Agy Rev Ser 101 (AMT)....... 5.400 04/01/32 1,013,925 1,885 New York St Ser C Rfdg...................... 5.000 04/15/19 1,981,041 460 New York St Twy Auth Svc Contract Rev Loc Hwy & Brdg.................................. 5.500 04/01/16 505,448 500 New York St Urban Dev Corp Rev Correctional Fac Ser A Rfdg.............................. 5.500 01/01/14 544,210 275 Oneida Cnty, NY Indl Dev Agy Civic Fac Saint Elizabeth Med Ser A......................... 5.875 12/01/29 252,098 200 Port Auth NY & NJ Spl Oblig (AMT)........... 7.000 10/01/07 210,828 1,000 Rensselaer Cnty, NY Indl Dev Agy Indl Dev Rev Franciscan Heights LP Proj Ser A (AMT) (LOC: JP Morgan Chase)...................... 5.375 12/01/36 1,036,390 1,000 Rockland Cnty, NY Solid Waste Ser B (AMT) (AMBAC Insd)................................ 5.000 12/15/23 1,027,280 1,000 Rondout Vly Cent Sch Dist NY Accord Ser A Rfdg (FGIC Insd)............................ 5.000 03/01/19 1,052,770 1,320 Sodus, NY Cent Sch Dist Rfdg (FGIC Insd).... 5.125 06/15/18 1,411,661 825 Suffolk Cnty, NY Indl Dev Agy Civic Fac Rev Family Svc League Suffolk Cnty (LOC: Fleet National)................................... 5.000 11/01/34 841,657 100 Syracuse, NY Hsg Auth Rev Sub Proj Loretto Rest Ser B.................................. 7.500 08/01/10 100,546 250 Syracuse, NY Indl Dev Agy Rev First Mtg Jewish Home Ser A........................... 7.375 03/01/21 263,953 2,000 Tobacco Settlement Fin Corp NY Ser C-1...... 5.500 06/01/22 2,155,840 2,000 Triborough Brdg & Tunl Auth NY Gen Purp Ser A........................................... 5.250 01/01/18 2,153,220 1,000 Triborough Brdg & Tunl Auth NY Gen Purp Ser A........................................... 5.000 01/01/32 1,020,880 1,000 Ulster Cnty, NY Res Recovery Agy Solid Waste Sys Rev Rfdg (AMBAC Insd)................... 5.250 03/01/18 1,066,940 1,000 Upper Mohawk Vly Regl Wtr Fin Auth NY Wtr Sys Rev (AMBAC Insd)........................ 5.750 04/01/20 1,101,320
See Notes to Financial Statements 11 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE --------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 310 Utica, NY Indl Dev Agy Civic Fac Rev Utica College Proj Ser A.......................... 5.750% 08/01/28 $ 305,663 500 Westchester Cnty, NY Indl Dev Agy Mtg Kendal on Hudson Proj Ser A........................ 6.375 01/01/24 508,425 1,000 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty Dev Ppty Yonkers Inc Ser A.................. 6.625 02/01/26 1,074,200 ------------ 113,566,756 ------------ U.S. VIRGIN ISLANDS 1.0% 1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt Taxes Ln Nt Ser A........................... 6.375 10/01/19 1,129,810 ------------ TOTAL LONG-TERM INVESTMENTS 97.2% (Cost $110,252,901)......................................................... 114,696,566 SHORT-TERM INVESTMENT 1.5% (Cost $1,800,000)........................................................... 1,800,000 ------------ TOTAL INVESTMENTS 98.7% (Cost $112,052,901)......................................................... 116,496,566 OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%................................... 1,526,620 ------------ NET ASSETS 100.0%............................................................ $118,023,186 ============
Percentages are calculated as a percentage of net assets. (a) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (b) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/ depreciation. Upon disposition, a realized gain or loss is recognized accordingly. (c) All or a portion of these securities have been physically segregated in connection with open futures contracts. 12 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax FGIC--Financial Guaranty Insurance Co. FHA--Federal Housing Administration FSA--Financial Security Assurance Inc. LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. Radian--Radian Asset Assurance XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 13 VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2005 (Unaudited) ASSETS: Total Investments (Cost $112,052,901)....................... $116,496,566 Cash........................................................ 156,639 Receivables: Interest.................................................. 1,591,217 Fund Shares Sold.......................................... 153,672 Investments Sold.......................................... 40,000 Other....................................................... 74,572 ------------ Total Assets............................................ 118,512,666 ------------ LIABILITIES: Payables: Distributor and Affiliates................................ 101,971 Income Distributions...................................... 99,866 Variation Margin on Futures............................... 47,125 Fund Shares Repurchased................................... 38,436 Investment Advisory Fee................................... 22,222 Trustees' Deferred Compensation and Retirement Plans........ 115,351 Accrued Expenses............................................ 64,509 ------------ Total Liabilities....................................... 489,480 ------------ NET ASSETS.................................................. $118,023,186 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $112,753,906 Net Unrealized Appreciation................................. 4,520,763 Accumulated Net Realized Gain............................... 432,387 Accumulated Undistributed Net Investment Income............. 316,130 ------------ NET ASSETS.................................................. $118,023,186 ============ MAXIMUM OFFERING PRICE PER COMMON SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $63,829,427 and 3,891,457 shares of beneficial interest issued and outstanding)............. $16.40 Maximum sales charge (4.75%* of offering price)......... .82 ------------ Maximum offering price to public........................ $17.22 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $36,259,549 and 2,213,784 shares of beneficial interest issued and outstanding)............. $16.38 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $17,934,210 and 1,093,789 shares of beneficial interest issued and outstanding)............. $16.40 ============
* On sales of $100,000 or more, the sales charge will be reduced. 14 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2005 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 2,762,014 ----------- EXPENSES: Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $78,533, $189,745 and $83,600, respectively)............................................. 351,878 Investment Advisory Fee..................................... 292,226 Shareholder Services........................................ 34,082 Legal....................................................... 16,985 Trustees' Fees and Related Expenses......................... 11,291 Custody..................................................... 5,796 Other....................................................... 72,853 ----------- Total Expenses.......................................... 785,111 Investment Advisory Fee Reduction....................... 148,518 Less Credits Earned on Cash Balances.................... 881 ----------- Net Expenses............................................ 635,712 ----------- NET INVESTMENT INCOME....................................... $ 2,126,302 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 592,171 Futures................................................... (38,832) ----------- Net Realized Gain........................................... 553,339 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 6,592,748 ----------- End of the Period: Investments............................................. 4,443,665 Futures................................................. 77,098 ----------- 4,520,763 ----------- Net Unrealized Depreciation During the Period............... (2,071,985) ----------- NET REALIZED AND UNREALIZED LOSS............................ $(1,518,646) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 607,656 ===========
See Notes to Financial Statements 15 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, 2005 SEPTEMBER 30, 2004 ------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 2,126,302 $ 4,310,048 Net Realized Gain/Loss................................. 553,339 (66,314) Net Unrealized Appreciation/Depreciation During the Period............................................... (2,071,985) 1,112,866 ------------ ------------ Change in Net Assets from Operations................... 607,656 5,356,600 ------------ ------------ Distributions from Net Investment Income: Class A Shares....................................... (1,185,086) (2,401,423) Class B Shares....................................... (575,740) (1,205,741) Class C Shares....................................... (272,635) (545,278) ------------ ------------ Total Distributions.................................... (2,033,461) (4,152,442) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (1,425,805) 1,204,158 ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold.............................. 10,866,375 17,546,428 Net Asset Value of Shares Issued Through Dividend Reinvestment......................................... 1,432,389 2,852,349 Cost of Shares Repurchased............................. (11,078,084) (25,202,533) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... 1,220,680 (4,803,756) ------------ ------------ TOTAL DECREASE IN NET ASSETS........................... (205,125) (3,599,598) NET ASSETS: Beginning of the Period................................ 118,228,311 121,827,909 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $316,130 and $223,289, respectively)........................................ $118,023,186 $118,228,311 ============ ============
16 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (a) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $16.60 $16.40 $16.49 $15.76 $14.91 $14.94 ------ ------ ------ ------ ------ ------ Net Investment Income........... .32 .65 .69 .74 .73 .77 Net Realized and Unrealized Gain/Loss..................... (.21) .17 (.10) .73 .88 (.07) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .11 .82 .59 1.47 1.61 .70 Less Distributions from Net Investment Income............... .31 .62 .68 .74 .76 .73 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $16.40 $16.60 $16.40 $16.49 $15.76 $14.91 ====== ====== ====== ====== ====== ====== Total Return* (b)................. 0.67%** 5.13% 3.69% 9.63% 10.97% 4.91% Net Assets at End of the Period (In millions)................... $ 63.8 $ 62.2 $ 63.6 $ 47.5 $ 43.5 $ 29.0 Ratio of Expenses to Average Net Assets*......................... .73% .76% .55% .38% .53% .61% Ratio of Net Investment Income to Average Net Assets*............. 3.92% 3.94% 4.19% 4.68% 4.74% 5.26% Portfolio Turnover................ 10%** 15% 27% 43% 30% 58% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets................... .98% 1.09% 1.06% 1.07% 1.13% 1.32% Ratio of Net Investment Income to Average Net Assets........ 3.67% 3.60% 3.68% 3.99% 4.14% 4.56%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. With respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be imposed on certain redemptions made within one year of purchase. If the sales charges were included, total returns would be lower. These returns do include Rule 12b-1 fees of up to .25% and do not reflect the deduction of taxes that a share holder would pay on Fund distributions or the redemptions of Fund shares. See Notes to Financial Statements 17 VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS B SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (a) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $16.58 $16.38 $16.47 $15.74 $14.90 $14.92 ------ ------ ------ ------ ------ ------ Net Investment Income........... .26 .52 .56 .62 .62 .66 Net Realized and Unrealized Gain/Loss..................... (.21) .18 (.09) .73 .86 (.06) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .05 .70 .47 1.35 1.48 .60 Less Distributions from Net Investment Income............... .25 .50 .56 .62 .64 .62 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $16.38 $16.58 $16.38 $16.47 $15.74 $14.90 ====== ====== ====== ====== ====== ====== Total Return* (b)................. 0.30%** 4.36% 2.93% 8.83% 10.09% 4.17% Net Assets at End of the Period (In millions)................... $ 36.3 $ 38.6 $ 40.5 $ 40.5 $ 35.0 $ 28.8 Ratio of Expenses to Average Net Assets*......................... 1.48% 1.51% 1.29% 1.13% 1.28% 1.36% Ratio of Net Investment Income to Average Net Assets*............. 3.17% 3.19% 3.45% 3.92% 3.99% 4.51% Portfolio Turnover................ 10%** 15% 27% 43% 30% 58% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets................... 1.73% 1.84% 1.80% 1.82% 1.88% 2.07% Ratio of Net Investment Income to Average Net Assets........ 2.92% 2.85% 2.94% 3.24% 3.39% 3.81%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include Rule 12b-1 fees of up to 1% and do not reflect the reduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 18 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ------------------------------------------------ 2005 2004 2003 2002 (a) 2001 2000 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $16.59 $16.39 $16.48 $15.75 $14.91 $14.92 ------ ------ ------ ------ ------ ------ Net Investment Income........... .27 .52 .56 .62 .60 .68 Net Realized and Unrealized Gain/Loss..................... (.21) .18 (.09) .73 .88 (.07) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .06 .70 .47 1.35 1.48 .61 Less Distributions from Net Investment Income............... .25 .50 .56 .62 .64 .62 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $16.40 $16.59 $16.39 $16.48 $15.75 $14.91 ====== ====== ====== ====== ====== ====== Total Return* (b)................. 0.36%**(d) 4.36% 2.92%(c) 8.83% 10.09% 4.24% Net Assets at End of the Period (In millions)................... $ 17.9 $ 17.5 $ 17.7 $ 12.0 $ 7.3 $ 4.6 Ratio of Expenses to Average Net Assets*......................... 1.41%(d) 1.51% 1.30% 1.13% 1.30% 1.36% Ratio of Net Investment Income to Average Net Assets*............. 3.24%(d) 3.19% 3.45%(c) 3.92% 3.97% 4.52% Portfolio Turnover................ 10%** 15% 27% 43% 30% 58% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets................... 1.66%(d) 1.84% 1.81% 1.82% 1.90% 2.07% Ratio of Net Investment Income to Average Net Assets........ 2.99%(d) 2.85% 2.94%(c) 3.23% 3.37% 3.81%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum contingent deferred sales charge of 1% charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns do include Rule 12b-1 fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average net Assets of .03%. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See Footnote 6). See Notes to Financial Statements 19 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen New York Tax Free Income Fund (the "Fund") is organized as a series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a non-diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors with a high level of current income exempt from federal, New York State and New York City income taxes, consistent with preservation of capital. The Fund seeks to achieve its investment objective by investing at least 80% of its total assets in a portfolio of New York municipal securities that are rated investment grade at the time of purchase. The Fund commenced investment operations on July 29, 1994, with three classes of common shares, Class A, Class B and Class C. The Fund registered Class I Shares on December 30, 2004. There were no sales of Class I Shares for the period ended March 31, 2005. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Future contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payments is made. At March 31, 2005, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies 20 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued and to distribute substantially all of its taxable income, if any, to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At September 30, 2004, the Fund had an accumulated capital loss carryforward for tax purposes of $78,198 which will expire on September 30, 2009. At March 31, 2005, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $112,091,147 ============ Gross tax unrealized appreciation........................... $ 4,515,572 Gross tax unrealized depreciation........................... (110,153) ------------ Net tax unrealized appreciation on investments.............. $ 4,405,419 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2004 was as follows:
2004 Distributions paid from: Ordinary Income........................................... $11,294 Long-term capital gain.................................... -0- ------- $11,294 =======
As of September 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $271
Net realized gains and losses may differ for financial reporting purposes primarily as a result of the deferral of losses relating to wash sale transactions. F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's custody fee was reduced by $881 as a result of credit earned on cash balances. 21 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... 0.60% Over $500 million........................................... 0.50%
For the six months ended March 31, 2005, the Adviser voluntarily waived $148,518 of its investment advisory fees. This represents .25% of its average net assets for the period. This waiver is voluntary and can be discontinued at any time. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $5,600, representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as counsel to the Fund. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $20,300 representing Van Kampen Investments or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2005, the Fund recognized expenses of approximately $25,500 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are also officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of $59,643 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2005. Appreciation/ depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 22 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS At March 31, 2005, capital aggregated $61,791,868, $33,507,576 and $17,454,462 for Classes A, B and C, respectively. For the six months ended March 31, 2005, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 473,657 $ 7,875,189 Class B................................................... 63,168 1,043,848 Class C................................................... 117,451 1,947,338 -------- ------------ Total Sales................................................. 654,276 $ 10,866,375 ======== ============ Dividend Reinvestment: Class A................................................... 50,516 $ 837,314 Class B................................................... 23,918 395,957 Class C................................................... 12,014 199,118 -------- ------------ Total Dividend Reinvestment................................. 86,448 $ 1,432,389 ======== ============ Repurchases: Class A................................................... (380,373) $ (6,300,339) Class B................................................... (199,384) (3,301,807) Class C................................................... (88,775) (1,475,938) -------- ------------ Total Repurchases........................................... (668,532) $(11,078,084) ======== ============
At September 30, 2004, capital aggregated $59,379,704, $35,369,578 and $16,783,944 for Classes A, B and C, respectively. For the year ended September 30, 2004, transactions were as follows:
SHARES VALUE Sales: Class A................................................... 776,337 $ 12,757,760 Class B................................................... 132,445 2,181,681 Class C................................................... 158,253 2,606,987 ---------- ------------ Total Sales................................................. 1,067,035 $ 17,546,428 ========== ============ Dividend Reinvestment: Class A................................................... 99,436 $ 1,632,645 Class B................................................... 50,889 834,539 Class C................................................... 23,478 385,165 ---------- ------------ Total Dividend Reinvestment................................. 173,803 $ 2,852,349 ========== ============ Repurchases: Class A................................................... (1,007,240) $(16,370,851) Class B................................................... (330,464) (5,404,452) Class C................................................... (210,103) (3,427,230) ---------- ------------ Total Repurchases........................................... (1,547,807) $(25,202,533) ========== ============
23 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued Class B Shares purchased on or after June 1, 1996 and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares seven years after the end of the calendar month in which the shares were purchased. For the six months ended March 31, 2005 and the year ended September 30, 2004, 43,990 and 15,022 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which the shares are purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the six months ended March 31, 2005 and the year ended September 30, 2004, 27,326 and 0 Class C Shares automatically converted to Class A Shares, respectively, and are shown in the above tables as sales of Class A Shares and repurchases of Class C Shares. Class B and Class C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be imposed on most redemptions made within six years of the purchase for Class B Shares and one year of the purchase for Class C Shares as detailed in the following schedule.
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, 2005, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $17,200 and CDSC on redeemed shares of approximately $43,200. Sales charges do not represent expenses of the Fund. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $12,175,070 and $11,583,337, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. 24 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued The Fund has a variety of reasons to use derivative instruments, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or to generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/ depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Bonds and typically closes the contract prior to the delivery date. These contracts are generally used to manage the Fund's effective maturity and duration. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated in the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the values of the contract (variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2005, are as follows:
CONTRACTS Outstanding at September 30, 2004........................... -0- Futures Opened.............................................. 220 Futures Closed.............................................. (104) ----- Outstanding at March 31, 2005............................... 116 =====
The futures contracts outstanding as of March 31, 2005, and the descriptions and unrealized appreciation are as follows:
SHORT UNREALIZED CONTRACTS: CONTRACTS APPRECIATION U.S. Treasury Notes 5-Year Futures June 2005 (Current Notional Value of $107,094 per contract).................. 116 $77,098 === =======
6. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .25% of Class A average daily net assets and up to 1.00% each for Class B and Class C average daily net assets are accrued daily. The annual 25 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued fees for Class A Shares are paid quarterly and the annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the annual fees are paid monthly, while 25% of the annual fees are paid quarterly. The amount of distribution expenses incurred by Van Kampen and not yet reimbursed ("unreimbursed receivable") was approximately $446,400 and $2,700 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a quarterly basis. Included in the fees for the six months ended March 31, 2005, are payments retained by Van Kampen of approximately $162,900 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $24,300. 7. LEGAL MATTERS The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. The consolidated action also names as defendants certain individual Trustees and Directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual Trustees of any Van Kampen funds. The consolidated amended complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants certain individual Trustees of certain Van Kampen funds; the named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of proprietary mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current Trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with the consolidated complaint described in the preceding paragraph. Plaintiff has sought leave to file a second amended derivative compliant that alleges that the Adviser permitted or recklessly disregarded market timing and late trading in its proprietary mutual funds in order to increase assets under management and fees. However, pursuant to an agreement between the parties, the plaintiff's proposed second amended derivative complaint was withdrawn and the allegations regarding market timing and late trading asserted therein were filed in a separate complaint and coordinated with other cases related to market timing that have been centralized in a federal court. 26 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 8. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 27 VAN KAMPEN NEW YORK TAX FREE INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* - President and Chief Executive Officer JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEPHANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRET Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS, INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 28 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 235, 325, 425 NYTF SAR 5/05 RN05-01061P-Y03/05 (VAN KAMPEN INVESTMENTS LOGO) Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semi-annual reports. Item 6. Schedule of Investments. Please refer to Item #1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. Controls and Procedures (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a) Code of Ethics -- Not applicable for semi-annual reports. (b)(1) A certification for the Principal Executive Officer of the registrant is attached hereto as part of EX-99.CERT. (b)(2) A certification for the Principal Financial Officer of the registrant is attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen Tax Free Trust By: /s/ Ronald E. Robison ---------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: May 19, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison --------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: May 19, 2005 By: /s/ James W. Garrett -------------------- Name: James W. Garrett Title: Principal Financial Officer Date: May 19, 2005