-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PQZrKoFJ/eZKcZPsGx1HwIYenZ1AQC4y0dMYuqFjnr9D6KYj44mV3P3xW8PzxrXz 5bcNx+sfEvA044D6kMFGBw== 0000950137-06-006444.txt : 20060601 0000950137-06-006444.hdr.sgml : 20060601 20060601101409 ACCESSION NUMBER: 0000950137-06-006444 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060601 DATE AS OF CHANGE: 20060601 EFFECTIVENESS DATE: 20060601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN TAX FREE TRUST CENTRAL INDEX KEY: 0000774556 IRS NUMBER: 363324847 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04386 FILM NUMBER: 06878750 BUSINESS ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC. STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2127625441 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC. STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST DATE OF NAME CHANGE: 19951219 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT TAX FREE FUND /IL/ DATE OF NAME CHANGE: 19920703 0000774556 S000002275 Van Kampen California Insured Tax Free Fund C000005905 Class A Shares VKCIX C000005906 Class B Shares VCIBX C000005907 Class C Shares VCICX C000005908 Class I Shares VCIIX 0000774556 S000002276 Van Kampen Insured Tax Free Income Fund C000005909 Class A Shares VKMTX C000005910 Class B Shares VMTBX C000005911 Class C Shares VMTCX C000005912 Class I Shares VMTIX 0000774556 S000002277 Van Kampen Intermediate Term Municipal Income Fund C000005913 Class A Shares VKLMX C000005914 Class B Shares VKLBX C000005915 Class C Shares VKLCX C000005916 Class I Shares VKLIX 0000774556 S000002278 Van Kampen Municipal Income Fund C000005917 Class A Shares VKMMX C000005918 Class B Shares VMIBX C000005919 Class C Shares VMICX C000005920 Class I Shares VMIIX 0000774556 S000002279 Van Kampen New York Tax Free Income Fund C000005921 Class A Shares VNYAX C000005922 Class B Shares VBNYX C000005923 Class C Shares VNYCX C000005924 Class I Shares VNYDX 0000774556 S000002280 Van Kampen Strategic Municipal Income Fund C000005925 Class A Shares VKMHX C000005926 Class B Shares VKTFX C000005927 Class C Shares VMHCX C000005928 Class I Shares VMHIX N-CSRS 1 c04350nvcsrs.txt SEMI-ANNUAL CERTIFIED SHAREHOLDER 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: 3/31/06 Item 1. Reports to Shareholders. The Trust's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Insured Tax Free Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2006. 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 3/31/06
A SHARES B SHARES C SHARES I SHARES since 12/14/84 since 5/03/93 since 8/13/93 since 8/12/05 - --------------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX AVERAGE 4.75% 4.00% 1.00% ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES Since Inception 7.58% 7.33% 4.77% 4.77% 4.41% 4.41% 1.78% 10-year 5.34 4.83 4.77 4.77 4.52 4.52 -- 5-year 4.91 3.89 4.12 3.87 4.10 4.10 -- 1-year 4.40 -0.55 3.67 -0.27 3.62 2.63 -- 6-month 1.45 -3.36 1.07 -2.83 1.02 0.04 1.58 - --------------------------------------------------------------------------------------------------- SEC Yield 3.29% 2.74% 2.74% 3.04%
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. Class I shares are available for purchase exclusively by investors through (i) tax-exempt retirement plans with assets of at least $1 million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase plans, defined benefit plans and non-qualified deferred compensation plans), (ii) fee-based investment programs with assets of at least $1 million and (iii) institutional clients with assets of at least $1 million. Class I shares are offered without any sales charges on purchases or sales and do not include combined Rule 12b-1 fees and service fees. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for 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 SIX-MONTH PERIOD ENDED MARCH 31, 2006 MARKET CONDITIONS Despite the shadow of rising oil prices, the devastation of the Gulf Coast hurricanes, and emerging weakness in the housing market, the economy continued to grow during the six-month period ended March 31, 2006. This expansion was more modest in the fourth quarter of 2005, but gained considerable momentum in the first quarter. Against the backdrop of growth and good employment data, the Federal Open Market Committee (the "Fed") continued raising the federal funds target rate during the period, implementing four additional increases of 25 basis points each. The final hike of the period represented the fifteenth consecutive increase -- the longest stretch of increases in 25 years. As the period came to a close, market observers speculated about the Fed's near-term intentions, given the central bank's view that although longer-term inflation appeared contained, commodity prices could amplify inflationary pressures. Returns across the municipal bond market varied significantly. As investors sought income opportunities, lower rated bonds outpaced investment-grade bonds by a wide margin. Long-term bonds earned the best returns, broadly speaking, while bonds in the three-to-seven year range posted the most muted gains. Municipal bond issuance was robust during the final months of 2005. (In fact, 2005 marked a record high for municipal bond volume.) The tide changed in the first quarter of 2006, however. As rising rates discouraged issuers from refinancing debt, national municipal issuance dropped by 30 percent versus the same period a year ago. While supply ebbed, the market's appetite for municipal bonds remained strong, with particularly heavy demand from high yield municipal bond funds. 2 PERFORMANCE ANALYSIS The fund returned 1.45 percent for the six months ended March 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 0.98 percent for the period. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006
- ------------------------------------------------------------------------ LEHMAN BROTHERS CLASS A CLASS B CLASS C CLASS I MUNICIPAL BOND INDEX 1.45% 1.07% 1.02% 1.58% 0.98% - ------------------------------------------------------------------------
The performance for the four share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and index definition. We managed the fund according to our long-standing "relative value" discipline. Our strategy involved buying bonds when our research indicates they are attractively valued, and then selling them when they reach our return targets. We then invested the proceeds into bonds which we believe offer greater future total return prospects. We used rigorous research to seek fundamentally strong issues with high liquidity. (Liquid securities are those for which there is a robust market of purchasers and sellers.) The fund invests in insured securities, with all bonds holding a credit rating of AAA. Throughout the period, we followed a variety of strategies to pursue yield within the parameters of our quality-driven approach. We positioned the portfolio to reflect our view that yields would continue to rise, with the yields of short-term bonds rising more rapidly than those of long-term bonds. Reflecting this analysis, we kept the fund's duration shorter than that of its benchmark; and this strategy served the fund well. (Duration is a measure of interest rate sensitivity.) The fund also benefited from our view that the long-term segment of the yield curve was most compelling. We sold shorter-maturity bonds that were pre- refunded, capturing appreciation gains. We redeployed these assets into longer- term bonds (generally those with maturities of 25 to 30 years), favoring issues with premium coupons and defensive characteristics. In contrast, we avoided non-callable bonds and zero-coupon bonds, as these tend to underperform during periods of rising interest rates. The fund's preference for well-known issues with dual tax exemption status enhanced performance. Such bonds enjoyed strong demand, while providing the liquidity we seek. Within its well-diversified portfolio, the fund maintained a bias to the essential services sector of the market; and this emphasis proved 3 advantageous as well. As of the close of the period, the fund's largest sector weightings were in the Public Education, Airports and Water & Sewer sectors. We also found attractive yield opportunities by broadening the portfolio to include securities insured by less well-known, but financially sound companies with AAA ratings. These bonds often offered higher yields than comparable issues insured by the most recognized companies. A small stake in inverse floating rate securities, representing 4.93 percent of assets at the close of the period, also buoyed performance. While these factors served the fund in good stead during the period, the fund's relative gains were tempered by its underweighting to the transportation sector relative to its Lehman benchmark. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. 4
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/06 California 16.5% Illinois 12.2 Texas 8.9 Florida 8.7 Washington 7.3 Georgia 4.8 Pennsylvania 3.2 Oklahoma 3.1 Colorado 3.0 Indiana 2.9 Michigan 2.7 Louisiana 2.5 New York 2.3 South Carolina 1.9 Arizona 1.8 North Carolina 1.6 Nevada 1.5 Alaska 1.5 Alabama 1.4 North Dakota 1.1 South Dakota 1.1 Arkansas 0.8 District of Columbia 0.6 New Jersey 0.6 Ohio 0.6 Wisconsin 0.5 Oregon 0.5 Missouri 0.4 Nebraska 0.3 Massachusetts 0.3 Utah 0.3 Puerto Rico 0.3 New Hampshire 0.2 Iowa 0.2 Mississippi 0.2 West Virginia 0.1 ----- Total Long-Term Investments 95.9% Short-Term Investments 4.0 ----- Total Investments 99.9 Other Assets in Excess of Liabilities 0.1 ----- Net Assets 100.0% CREDIT QUALITY AS OF 3/31/06 AAA/Aaa 100.0% Based upon the highest quality ratings as issued by Standard & Poor's or Moody's. TOP FIVE SECTORS AS OF 3/31/06 Public Education 17.2% Airports 13.5 Water & Sewer 10.0 Wholesale Electric 9.3 Higher Education 8.3
5 Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities in the sectors shown above. 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 & Poor's and Moody's, respectively. 6 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters 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 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 7 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 8 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales 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 10/1/05 - 3/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. 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* ------------------------------------------------- 10/1/05 3/31/06 10/1/05-3/31/06 Class A Actual..................................... $1,000.00 $1,014.53 $4.37 Hypothetical............................... 1,000.00 1,020.53 4.38 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,010.69 8.17 Hypothetical............................... 1,000.00 1,016.73 8.20 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,010.16 8.17 Hypothetical............................... 1,000.00 1,016.73 8.20 (5% annual return before expenses) Class I Actual..................................... 1,000.00 1,015.81 3.16 Hypothetical............................... 1,000.00 1,021.73 3.18 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.87%, 1.63%, 1.63%, and 0.63% for Class A, B, C and I Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 9 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MUNICIPAL BONDS 95.9% ALABAMA 1.4% $ 1,385 Alabama St Brd Ed Rev Calhoun Cmnty College (AMBAC Insd)................................... 5.000% 05/01/21 $ 1,457,754 200 Alabama St Brd Ed Rev Calhoun Cmnty College (AMBAC Insd)................................... 5.000 05/01/22 210,198 2,255 Alabama St Brd Ed Rev George C Wallace Cmnty College (AMBAC Insd) (a)....................... 5.250 07/01/23 2,408,791 2,145 Birmingham, AL Wtrwks & Swr Brd Ser A (FGIC Insd) (a)...................................... 5.000 01/01/21 2,243,649 3,590 Clarke & Mobile Cnty AL Gas Dist Rev (AMBAC Insd) (a)...................................... 5.250 01/01/21 3,838,895 3,120 Huntsville, AL Hlthcare Auth Ser A (MBIA Insd).......................................... 5.400 06/01/22 3,365,076 2,500 Huntsville, AL Hlthcare Auth Ser A (MBIA Insd).......................................... 5.500 06/01/27 2,705,500 -------------- 16,229,863 -------------- ALASKA 1.5% 2,000 Alaska St Hsg Fin Corp Gen Hsg Ser A (FGIC Insd).................................... 5.000 12/01/30 2,063,020 1,000 Alaska St Hsg Fin Corp Gen Hsg Ser A (FGIC Insd).................................... 5.250 12/01/41 1,048,150 8,045 Alaska St Intl Arpt Rev Rols RR II 527 (Inverse Fltg) (Acquired 03/10/06, Cost $8,922,388) (MBIA Insd) (a) (b)............................ 6.710 10/01/24 8,780,957 4,000 Alaska St Intl Arpt Rev Ser A Rfdg (AMT) (MBIA Insd).......................................... 5.000 10/01/21 4,140,480 1,425 Anchorage, AK Wtr Rev Rfdg (AMBAC Insd)........ 6.000 09/01/19 1,539,997 -------------- 17,572,604 -------------- ARIZONA 1.8% 1,940 Arizona St Univ Ctf Partn Resh Infrastructure Proj (AMBAC Insd).............................. 5.250 09/01/23 2,068,215 1,225 Arizona St Univ Ctf Partn Resh Infrastructure Proj (AMBAC Insd).............................. 5.250 09/01/24 1,305,078 2,900 Arizona Tourism & Sports Auth Multi Purp Stad Fac Ser A (MBIA Insd).......................... 5.375 07/01/22 3,112,744 5,000 Maricopa Cnty, AZ Pollutn Ctl Corp Pollutn Ctl Rev El Paso Elec Co Ser A Rfdg (FGIC Insd)..... 4.800 08/01/40 4,995,500 640 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig Irvington Proj Tucson Elec Pwr Co Ser A Rfdg (FSA Insd)................................ 7.250 07/15/10 645,517 1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)................... 6.000 09/01/12 1,969,200 1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)................... 6.125 09/01/17 1,839,582 1,000 University AZ Ctf Partn Ser A (AMBAC Insd)..... 5.000 06/01/23 1,043,650 1,000 University AZ Ctf Partn Ser B (AMBAC Insd)..... 5.000 06/01/22 1,044,420 960 University AZ Ctf Partn Ser B (AMBAC Insd)..... 5.000 06/01/24 1,001,165
10 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ARIZONA (CONTINUED) $ 300 University AZ Ctf Partn Ser C (AMBAC Insd)..... 5.000% 06/01/21 $ 313,785 1,885 University AZ Ctf Partn Ser C (AMBAC Insd)..... 5.000 06/01/22 1,968,732 -------------- 21,307,588 -------------- ARKANSAS 0.8% 2,500 Arkansas St Dev Fin Auth Rev St Agy Fac Donaghey Plaza Proj (FSA Insd)................. 5.000 06/01/29 2,595,750 6,265 Little Rock, AR Sch Dist Ser B Rfdg (FSA Insd).......................................... 5.500 02/01/25 6,608,761 -------------- 9,204,511 -------------- CALIFORNIA 16.5% 4,000 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Pool Ser A (XLCA Insd)......................... 5.250 09/01/35 4,223,880 3,225 Bay Area Govt Assn CA Rev Tax Alloc Ser A (AMBAC Insd) (c)............................... 4.500 09/01/25 3,177,657 3,205 Bell, CA Cmnty Hsg Auth Lease Rev Rfdg (AMBAC Insd).......................................... 5.000 10/01/30 3,336,565 3,310 Bell, CA Cmnty Hsg Auth Lease Rev Rfdg (AMBAC Insd).......................................... 5.000 10/01/36 3,419,991 3,500 California Ed Fac Auth Rev Occidental College Ser A (MBIA Insd).............................. 5.000 10/01/36 3,646,440 3,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)............................... 5.375 10/01/20 3,234,420 3,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)............................... 5.000 10/01/22 3,111,960 5,000 California Stwide Cmnty Depooled Fin Pg Ser 2004A (FSA Insd)............................... 5.250 10/01/24 5,348,050 4,615 California Stwide Cmnty Dev Auth Wtr & Wastewtr Rev Ser D (FSA Insd) (a)....................... 5.000 10/01/26 4,833,613 3,000 California Stwide Cmnty Pooled Fin Pg Ser 2004A (FSA Insd)..................................... 5.000 10/01/29 3,118,950 4,000 California Stwide Cmnty Pooled Fin Pg Ser 2004A (FSA Insd)..................................... 5.250 10/01/34 4,225,160 2,980 California Stwide Cmnty Pooled Fin Pg Ser 2004C (FSA Insd) (a)................................. 5.000 10/01/29 3,098,157 7,430 Capistrano, CA Uni Sch Dist (FGIC Insd) (a).... 5.000 09/01/25 7,738,419 7,995 Capistrano, CA Uni Sch Dist (FGIC Insd) (a).... 5.000 09/01/26 8,320,636 8,600 Capistrano, CA Uni Sch Dist (FGIC Insd) (a).... 5.000 09/01/27 8,943,570 3,500 Capistrano, CA Uni Sch Dist (FGIC Insd)........ 5.000 09/01/29 3,637,095 5,000 Chino Vly Uni Sch Dist CA Election 2002 Ser C (MBIA Insd).................................... 5.250 08/01/30 5,371,650 3,225 Coronado, CA Cmnty Dev Agy Tax Alloc Coronado Cmnty Dev Proj (AMBAC Insd).................... 5.000 09/01/30 3,341,293 425 Earlimart, CA Elem Sch Dist Ser 1 (AMBAC Insd).......................................... 6.700 08/01/21 546,269 10,000 Golden St Tob Securitization Corp CA Tob Settlement Rev Enhanced Asset Bkd Ser A (AMBAC Insd).......................................... 5.000 06/01/30 10,268,900
See Notes to Financial Statements 11 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- $10,000 Golden St Tob Securitization Corp CA Tob Settlement Rev Enhanced Asset Bkd Ser A (FGIC Insd).......................................... 5.000% 06/01/38 $ 10,277,000 265 Golden West Sch Fin Auth CA Rev Ser A Rfdg (MBIA Insd) (a)................................ 5.750 08/01/19 306,740 690 Jurupa, CA Univ Sch Dist Election 2001 (FGIC Insd).......................................... 5.000 08/01/26 716,323 940 Lancaster, CA Redev Agy Tax Alloc Comb Fire Prot Fac Proj Rfdg (XLCA Insd)................. 5.250 12/01/18 1,009,964 3,360 Loma Linda, CA Redev Agy Tax Alloc Ser A (XLCA Insd).......................................... 5.250 07/01/30 3,573,562 2,500 Long Beach, CA Bd Fin Auth Rev Redev Hsg & Gas Util Fin Ser A1 (AMBAC Insd)................... 5.000 08/01/40 2,570,075 3,600 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Sub Ser A-1 (FSA Insd)................................. 5.000 07/01/40 3,730,572 10,000 Merced, CA Irr Dist Rev Ctf Partn Elec Sys Proj (XLCA Insd).................................... 5.250 09/01/36 10,503,500 1,165 North Monterey Cnty, CA Uni Sch Dist Election 2002 Ser B (FGIC Insd)......................... 4.750 08/01/29 1,182,929 2,070 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd) (a)............................................ 5.250 10/01/23 2,217,156 5,000 Palm Springs, CA Fin Lease Rev Convention Ctr Proj Ser A (MBIA Insd)......................... 5.500 11/01/29 5,512,400 2,375 Poway, CA Ctf Partn City Office Bldg Proj (AMBAC Insd)................................... 5.000 01/01/23 2,459,384 2,250 Riverside, CA Ctf Partn (AMBAC Insd) (a)....... 5.000 09/01/23 2,336,715 1,840 Rohnert Park, CA Swr Sys Rev Ctf Partn Spl Term (AMBAC Insd)................................... 5.000 06/01/30 1,907,675 3,200 Rohnert Park, CA Swr Sys Rev Ctf Partn Spl Term (AMBAC Insd) (a)............................... 5.000 06/01/36 3,307,968 3,770 San Diego Cnty, CA Ctf Partn Edgemont Proj & Regl Sys Rfdg (AMBAC Insd) (a)................. 5.000 02/01/21 3,940,894 9,085 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd).... 5.375 03/01/18 9,809,529 3,000 San Jose, CA Redev Agy Tax Alloc Ser A (MBIA Insd).......................................... 5.000 08/01/25 3,123,570 2,570 San Marcos, CA Pub Fac Auth Rols RR II 514 (Inverse Fltg) (Acquired 02/10/06, Cost $2,852,751) (AMBAC Insd) (b)................... 6.719 10/01/31 2,789,761 2,785 Santa Monica, CA Cmnty College Ser A Rfdg (AMBAC Insd)................................... 5.000 02/01/27 2,880,553 1,775 Sierra, CA Jt Cmnty College Impt Dist 2 Westn Nevada Ser A (FGIC Insd) (a)................... 5.000 08/01/28 1,845,379 1,960 Sierra, CA Jt Cmnty College Impt Dist 2 Westn Nevada Ser A (FGIC Insd) (a)................... 5.000 08/01/29 2,037,714 5,380 South Orange Cnty CA Pub Fin Auth Spl Tax Rev Ladera Ranch Ser A (AMBAC Insd)................ 5.000 08/15/27 5,614,945 2,000 South Tahoe CA Jt Pwr Fin Redev Proj Area No 1 Ser A Rfdg (AMBAC Insd)........................ 5.000 10/01/35 2,071,140
12 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- $ 3,560 Southern CA Pub Pwr Auth Rev Proj Ser A Rfdg (FSA Insd) (a)................................. 5.000% 01/01/19 $ 3,762,493 2,110 Val Verde, CA Uni Sch Dist Ctf Sch Constr Proj Ser B Rfdg (FGIC Insd) (a)..................... 5.000 01/01/22 2,206,448 2,150 Val Verde, CA Uni Sch Dist Ctf Sch Constr Proj Ser B Rfdg (FGIC Insd)......................... 5.000 01/01/25 2,234,000 2,370 Val Verde, CA Uni Sch Dist Ctf Sch Constr Proj Ser B Rfdg (FGIC Insd)......................... 5.000 01/01/30 2,453,898 1,750 Vallejo City, CA Uni Sch Ser A Rfdg (MBIA Insd).......................................... 5.900 08/01/25 2,074,572 -------------- 191,399,534 -------------- COLORADO 3.0% 3,745 Colorado Ed & Cultural Fac Auth Rev Charter Sch Aurora Academy Sch Proj Ser A Rfdg (XLCA Insd) (a)............................................ 5.250 02/15/34 3,945,769 2,500 Colorado Ed & Cultural Fac Auth Rev Charter Sch Bromley Sch Proj Rfdg (XLCA Insd).............. 5.250 09/15/32 2,657,900 1,000 Colorado Ed & Cultural Fac Auth Rev Charter Sch Woodrow Wilson Sch Proj Ser A Rfdg (XLCA Insd).......................................... 5.250 12/01/34 1,061,830 2,505 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/16 2,767,574 4,310 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/17 4,764,145 3,525 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/18 3,893,785 2,165 Denver, CO City & Cnty Arpt Rev Ser B (XLCA Insd).......................................... 5.750 11/15/20 2,394,468 5,000 Denver, CO City & Cnty Arpt Rev Sys Ser A (XLCA Insd).......................................... 5.000 11/15/25 5,215,100 2,000 Fremont Cnty, CO Ctf Partn & Impt Ser A Rfdg (MBIA Insd).................................... 5.250 12/15/26 2,115,980 1,175 Thornton, CO Ctf Partn (AMBAC Insd)............ 5.375 12/01/19 1,265,592 3,080 Thornton, CO Ctf Partn (AMBAC Insd) (a)........ 5.375 12/01/21 3,301,668 1,650 Thornton, CO Ctf Partn (AMBAC Insd)............ 5.375 12/01/22 1,768,750 -------------- 35,152,561 -------------- DISTRICT OF COLUMBIA 0.6% 1,000 District of Columbia Ctf Partn Dist Pub Safety & Emergency (AMBAC Insd)....................... 5.500 01/01/19 1,077,970 2,000 District of Columbia Ctf Partn Dist Pub Safety & Emergency (AMBAC Insd)....................... 5.500 01/01/20 2,157,300 4,000 Metropolitan Washington DC Arpt Ser A (AMT) (FSA Insd)..................................... 5.000 10/01/32 4,120,280 -------------- 7,355,550 --------------
See Notes to Financial Statements 13 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA 8.7% $ 1,000 Brevard Cnty, FL Sch Brd Ctf Partn Ser A (AMBAC Insd).......................................... 5.400% 07/01/12 $ 1,080,410 500 Dade Cnty, FL Aviation Rev Ser B (MBIA Insd)... 5.600 10/01/26 514,030 1,000 Dade Cnty, FL Ed Fac Auth Rev Exchanged From Univ of Miami Ser B (MBIA Insd)................ 5.750 04/01/20 1,021,660 750 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC Insd).... 5.375 10/01/16 782,647 140 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd).......................................... 5.950 07/01/20 147,416 1,000 Escambia Cnty, FL Util Auth Util Sys Rev (FGIC Insd).......................................... 5.250 01/01/24 1,043,540 1,000 Florida Intergovnmtl Fin Ser C1 (AMBAC Insd)... 5.125 02/01/31 1,028,780 575 Florida Muni Ln Council Rev Ser B (MBIA Insd).......................................... 5.750 11/01/14 624,858 1,185 Florida St Brd Ed Cap Outlay Pub Ed Ser C (FGIC Insd).......................................... 5.000 06/01/23 1,234,924 1,250 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd).......................................... 6.000 07/01/12 1,367,300 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd).......................................... 6.000 07/01/14 1,093,840 2,750 Florida St Brd Ed Lottery Rev Ser B (FGIC Insd).......................................... 5.250 07/01/13 2,864,867 750 Florida St Brd of Regt Hsg Rev (MBIA Insd)..... 5.750 07/01/14 813,090 1,365 Florida St Correctional Privatization Commn Ctf Partn (MBIA Insd).............................. 5.375 08/01/14 1,471,183 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 1,795,132 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 1,564,305 1,340 Gulf Breeze, FL Rev Loc Govt (FGIC Insd) (d)... 5.150 12/01/20 1,410,095 500 Gulf Breeze, FL Rev Loc Govt (Variable Rate Coupon) (FGIC Insd)............................ 5.650 12/01/20 530,940 1,000 Indian River Cnty, FL Hosp Rev Rfdg (FSA Insd).......................................... 6.100 10/01/18 1,031,440 1,750 Jea, FL Wtr & Swr Sys Rev Ser A (MBIA Insd).... 5.375 10/01/30 1,776,880 1,000 Key West, FL Util Brd Elec Rev Cap Apprec Ser D (Escrowed to Maturity) (AMBAC Insd)............ * 10/01/13 715,440 8,490 Miami-Dade Cnty, FL Sch Brd Ser B (a) (c)...... 5.000 11/01/21 8,964,846 5,890 Miami-Dade Cnty, FL Aviation Rev Miami Intl Arpt Ser A (AMT) (CIFG Insd)................... 5.000 10/01/38 6,026,412 1,000 Miami-Dade Cnty, FL Hlth Fac Miami Childrens Hosp Ser A Rfdg (AMBAC Insd)................... 5.125 08/15/26 1,036,760 5,000 Miami-Dade Cnty, FL Pub Fac Rev Jackson Hlth Sys Ser A (MBIA Insd).......................... 5.000 06/01/31 5,163,000 1,000 Orange Cnty, FL Sch Brd Ctf Partn Ser A (AMBAC Insd).......................................... 5.250 08/01/14 1,073,100 5,000 Orange Cnty, FL Sch Brd Ctf Partn Ser B (FGIC Insd).......................................... 5.000 08/01/24 5,236,050 1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive Universal Blvd Rfdg (AMBAC Insd)............... 5.125 04/01/20 1,056,650
14 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 3,275 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).......................................... 5.000% 08/01/18 $ 3,449,688 800 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).......................................... 5.125 08/01/26 830,144 2,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A Rfdg (FSA Insd).......................................... 5.000 08/01/21 2,101,080 4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA Insd)..................................... 5.000 08/01/21 4,151,320 4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA Insd)..................................... 5.000 08/01/22 4,146,840 750 Polk Cnty, FL Sch Brd Ctf Partn Master Lease Ser A (FSA Insd)............................... 5.500 01/01/16 807,263 1,000 Port Saint Lucie, FL Spl Assmt Rev Util Svc Area No 3 & 4A (MBIA Insd)..................... 5.000 10/01/18 1,035,770 1,505 Reedy Creek, FL Impt Dist FL Util Ser 1 (AMBAC Insd).......................................... 5.000 10/01/24 1,581,063 535 Saint Johns Cnty, FL Indl Dev Auth Professional Golf Proj Rfdg (MBIA Insd)..................... 5.250 09/01/12 576,318 1,000 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA Insd).......................................... 5.000 07/01/21 1,037,390 3,245 Santa Rosa Bay Brdg Auth FL Rev Cap Apprec (MBIA Insd).................................... * 07/01/18 1,880,185 4,000 Sunrise, FL Util Sys Rev Rfdg (AMBAC Insd)..... 5.200 10/01/22 4,390,400 10,000 Tallahassee, FL Hlth Fac Rev Tallahassee Mem Regl Med Ser A Rfdg (MBIA Insd) (e)............ 6.625 12/01/13 10,122,800 2,610 University Cent FL Ctf Partn UCF Convocation Corp Ser A (FGIC Insd) (a)..................... 5.000 10/01/26 2,721,264 2,740 University Cent FL Ctf Partn UCF Convocation Corp Ser A (FGIC Insd) (a)..................... 5.000 10/01/27 2,852,477 1,000 Village Ctr Cmnty Dev Dist FL Ser A (MBIA Insd).......................................... 5.200 11/01/25 1,057,250 3,735 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry Riddle Ser B Rfdg (AMBAC Insd)................. 5.250 10/15/19 3,941,433 1,000 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry Riddle Ser B Rfdg (AMBAC Insd)................. 5.250 10/15/22 1,052,590 -------------- 100,204,870 -------------- GEORGIA 4.8% 4,345 Albany Dougherty, GA Inner City Auth Rev Albany St Univ Student Hsg Ser A (XLCA Insd).......... 5.000 07/01/25 4,539,395 4,590 Bleckley-Cochran, GA Dev Auth Student Hsg Fac Rev MGC Real Estate Fndtn Ser A (CIFG Insd) (a)............................................ 5.000 07/01/25 4,777,639 11,355 Bleckley-Cochran, GA Dev Auth Student Hsg Fac Rev MGC Real Estate Fndtn Ser A (CIFG Insd) (a)............................................ 5.000 07/01/36 11,697,580 5,115 Douglasville-Douglas Cnty, GA Wtr & Swr Auth Rev (MBIA Insd)................................ 5.000 06/01/27 5,339,907
See Notes to Financial Statements 15 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- GEORGIA (CONTINUED) $14,530 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y (AMBAC Insd)................................... 6.400% 01/01/13 $ 16,255,873 9,445 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y (MBIA Insd).......................................... 6.500 01/01/17 11,029,682 160 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y (Prerefunded @ 01/01/11) (AMBAC Insd).......... 6.400 01/01/13 178,538 145 Georgia Muni Elec Auth Pwr Rev 2005 Ser Y (Prerefunded @ 01/01/14) (MBIA Insd)........... 6.500 01/01/17 169,415 860 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (AMBAC Insd)...................... 6.400 01/01/13 967,122 410 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (MBIA Insd)....................... 6.500 01/01/17 482,504 -------------- 55,437,655 -------------- ILLINOIS 12.2% 1,105 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd).......................................... * 01/01/19 617,231 2,845 Chicago, IL Brd Ed Cap Apprec Sch Reform B 1 (FGIC Insd).................................... * 12/01/19 1,530,126 1,500 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd).................................... * 12/01/19 803,520 1,020 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A (FGIC Insd).................................... * 12/01/25 405,175 2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (f)...................................... 0/5.700 01/01/25 2,154,100 2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA Insd) (f)...................................... 0/5.750 01/01/29 2,149,260 5,925 Chicago, IL Midway Arpt Rev Second Lien Ser B Rfdg (AMBAC Insd) (a).......................... 5.000 01/01/21 6,191,447 6,220 Chicago, IL Midway Arpt Rev Second Lien Ser B Rfdg (AMBAC Insd) (a).......................... 5.000 01/01/22 6,490,508 8,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser A (FGIC Insd)......................... 5.000 01/01/33 8,283,600 1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser A Rfdg (MBIA Insd).................... 5.000 01/01/29 1,038,330 2,840 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd) (a)................ 5.250 01/01/21 3,011,224 2,975 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd) (a)................ 5.250 01/01/22 3,152,370 3,120 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/23 3,303,893 1,430 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/24 1,513,326 5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser E Rfdg (CIFG Insd).................... 5.000 01/01/34 5,130,450
16 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 8,750 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 239-2 (Inverse Fltg) (Acquired 08/18/03, Cost $9,500,313) (AMT) (FSA Insd) (b)............... 8.180% 01/01/20 $ 10,376,013 10,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 239-3 (Inverse Fltg) (Acquired 08/18/03, Cost $10,760,100) (AMT) (FSA Insd) (a) (b).......... 8.180 01/01/21 11,844,600 6,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II 494-1 (Inverse Fltg) (Acquired 12/16/05, Cost $6,736,860) (MBIA Insd) (b).................... 7.216 01/01/24 6,838,020 5,000 Chicago, IL Pk Dist Ser A (FGIC Insd).......... 5.000 01/01/31 5,197,200 615 Chicago, IL Pk Dist Ser C (FGIC Insd).......... 5.500 01/01/19 658,407 3,230 Chicago, IL Proj Ser A Rfdg (FGIC Insd)........ 5.375 01/01/34 3,375,899 4,950 Chicago, IL Proj Ser A Rfdg (MBIA Insd)........ 5.500 01/01/38 5,279,769 145 Chicago, IL Proj Ser A Rfdg (AMBAC Insd)....... 5.625 01/01/39 157,115 50 Chicago, IL Proj Ser A Rfdg (Prerefunded @ 01/01/11) (MBIA Insd).......................... 5.500 01/01/38 54,293 290 Cook Cnty, IL Sch Dist No 100 Berwyn South Cap Apprec (FSA Insd) (a).......................... 8.200 12/01/14 372,638 345 Cook Cnty, IL Sch Dist No 100 Berwyn South Cap Apprec (FSA Insd) (a).......................... 8.100 12/01/16 456,780 2,605 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd) (a)...................................... * 12/01/17 1,544,869 2,995 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd) (a)...................................... * 12/01/18 1,685,796 4,210 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd) (a)...................................... * 12/01/19 2,255,213 4,050 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC Insd).......................................... * 12/01/20 2,063,759 3,000 Du Page Cnty, IL Cmnty High Sch (FSA Insd)..... 5.600 01/01/22 3,267,960 750 Du Page Cnty, IL Cmnty High Sch Rfdg (FSA Insd).......................................... 5.000 12/01/17 791,828 1,860 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/20 1,982,276 1,180 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/21 1,257,125 2,000 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford Sch 205 (FSA Insd)............................. 6.650 02/01/11 2,245,080 5,025 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford Sch 205 (FSA Insd)............................. 6.650 02/01/12 5,144,595 4,800 Illinois Fin Auth Rev Swedish American Hosp (AMBAC Insd)................................... 5.000 11/15/31 4,921,392 2,000 Illinois Med Dist (MBIA Insd).................. 5.250 06/01/32 2,083,480 3,500 Illinois Muni Elec Agy Pwr Supply Sys Rev Rfdg (FSA Insd)..................................... 5.000 02/01/21 3,598,665 1,200 Lake Cnty, IL Cmnty Cons Sch Dist No 50 Woodland Cap Apprec Ser B (FGIC Insd).......... * 12/01/14 829,380 6,790 Lake Cnty, IL Cmnty Unit Sch Dist No 60 Waukegan Cap Apprec Ser A (FSA Insd)........... * 12/01/17 4,017,575
See Notes to Financial Statements 17 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 1,000 Madison & St Clair Cnty, IL Sch Dist No 10 Collinsville Rfdg (FGIC Insd).................. 5.000% 02/01/21 $ 1,047,570 3,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No 158 Cap Apprec (FGIC Insd)..................... * 01/01/17 1,855,440 4,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No 158 Cap Apprec (FGIC Insd)..................... * 01/01/18 2,349,520 1,330 McHenry Cnty, IL Cmnty High Sch Dist No 154 Cap Apprec (FGIC Insd)............................. * 01/01/16 865,936 6,000 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expn Ser A (MBIA Insd).... 5.250 06/15/42 6,319,200 175 Peoria, IL Ser B Rfdg (FGIC Insd).............. 5.000 01/01/20 184,051 1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux Ser A (MBIA Insd).................................... * 04/01/20 523,990 -------------- 141,219,994 -------------- INDIANA 2.9% 990 Indiana Bd Bk Spl Pgm Ser A (Escrowed to Maturity) (AMBAC Insd)......................... 9.750 08/01/09 1,093,039 6,745 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty Proj Ser A (AMBAC Insd)............................. 5.000 05/01/35 6,943,236 2,335 Lake Cnty, IN Bldg Corp First Mtg (MBIA Insd) (a)............................................ 5.750 08/01/11 2,514,445 1,550 Marion Cnty, IN Convention & Rec Lease Rent Ser A Rfdg (AMBAC Insd)............................ 5.000 06/01/21 1,607,986 1,700 New Prarie Utd Sch Bldg Corp Ind Rfdg (FSA Insd) (a)...................................... 5.000 07/05/18 1,788,026 2,000 Plainfield, IN Cmnty High Sch Bldg Corp First Mgt (FGIC Insd)................................ 5.000 07/15/27 2,079,140 2,555 Plainfield, IN Cmnty High Sch Bldg Corp First Mtg (FGIC Insd)................................ 5.000 07/15/28 2,658,171 1,055 Plainfield, IN Cmnty High Sch Bldg Corp First Mtg (FGIC Insd)................................ 5.000 01/15/30 1,095,058 1,900 South Harrison, IN 2000 Sch Bldg Corp Ser A (FSA Insd)..................................... 5.250 01/15/25 2,025,818 5,780 Wawasee Cmnty Sch Corp IN New Elem & Remodeling Bldg Corp First Mtg Rfdg (FSA Insd) (a)........ 5.000 07/15/24 6,086,456 4,900 Wayne Twp, IN Marion Cnty Sch First Mtg Rfdg (FGIC Insd).................................... 5.000 07/15/27 5,133,338 -------------- 33,024,713 -------------- IOWA 0.2% 2,375 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)................................ 5.750 07/01/17 2,473,349 --------------
18 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- LOUISIANA 2.5% $ 4,065 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev Lake Charles Mem Hosp Proj Ser A (Connie Lee Insd).......................................... 6.375% 12/01/12 $ 4,385,159 5,530 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev Lake Charles Mem Hosp Proj Ser A (Connie Lee Insd).......................................... 6.500 12/01/18 6,591,539 7,500 Lafayette, LA Util Rev (MBIA Insd)............. 5.250 11/01/24 7,981,725 655 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/16 703,522 2,035 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd) (a)........................... 5.375 12/01/17 2,180,848 2,150 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd) (a)........................... 5.375 12/01/18 2,304,091 2,165 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/19 2,320,166 2,295 Louisiana Loc Govt Environment BRCC Fac Corp Proj (MBIA Insd)............................... 5.375 12/01/20 2,459,483 680 New Orleans, LA Home Mtg Auth Single Family Mtg Rev 1985 Ser A (MBIA Insd)..................... * 09/15/16 229,296 -------------- 29,155,829 -------------- MASSACHUSETTS 0.3% 2,700 Massachusetts Muni Whsl Elec Co Nuclear Mix 1-A (MBIA Insd).................................... 5.250 07/01/13 2,903,256 175 Massachusetts Muni Whsl Elec Co Proj No 6-A (MBIA Insd).................................... 5.250 07/01/16 187,520 -------------- 3,090,776 -------------- MICHIGAN 2.7% 125 Chippewa Valley, MI Sch Bldg & Site (FSA Insd).......................................... 5.000 05/01/20 131,855 5,000 Detroit, MI City Sch Dist Sch Bldg & Site Impt Ser A Rfdg (FSA Insd).......................... 5.000 05/01/25 5,212,950 1,400 Huron, MI Sch Dist (FSA Insd).................. 5.250 05/01/21 1,478,876 10,000 Michigan Muni Bd Auth Rev Sch Dist City of Detroit (FSA Insd)............................. 5.000 06/01/19 10,474,900 5,000 Michigan Muni Bd Auth Rev Sch Dist City of Detroit (FSA Insd)............................. 5.000 06/01/20 5,225,900 2,520 Southgate, MI Cmnty Sch Dist Rfdg (FGIC Insd) (a)............................................ 5.000 05/01/22 2,648,495 2,675 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg (FGIC Insd).................................... 5.375 12/01/17 2,871,559 2,840 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg (FGIC Insd).................................... 5.375 12/01/20 3,048,683 -------------- 31,093,218 --------------
See Notes to Financial Statements 19 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- MISSISSIPPI 0.2% $ 1,000 Harrison Cnty, MS Wastewtr Mgmt & Solid Wastewtr Treatment Fac Ser A Rfdg (FGIC Insd).......................................... 8.500% 02/01/13 $ 1,249,130 1,050 Tupelo, MS Pub Sch Dist Rfdg (FSA Insd)........ 5.000 11/01/15 1,112,444 -------------- 2,361,574 -------------- MISSOURI 0.4% 1,170 Mehlville, MO Sch Dist No R-9 Ctf Partn Ser A (FSA Insd)..................................... 5.500 03/01/16 1,251,736 1,225 Mehlville, MO Sch Dist No R-9 Ctf Partn Ser A (FSA Insd)..................................... 5.500 03/01/17 1,308,766 900 Saint Louis Cnty MO Regl Contv & Sports Complex Auth Convtn & Sports Fac Rfdg (AMBAC Insd)..... 5.250 08/15/17 959,274 940 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A (MBIA Insd).................................... 5.375 07/01/17 1,005,960 -------------- 4,525,736 -------------- NEBRASKA 0.3% 3,620 Saunders Cnty, NE (FSA Insd) (a)............... 5.000 11/01/35 3,699,097 -------------- NEVADA 1.5% 5,020 Clark Cnty, NV Arpt Rev Rols RR II 292-3 (Inverse Fltg) (Acquired 07/30/04, Cost $5,493,386) (AMT) (FGIC Insd) (b).............. 7.673 07/01/22 5,744,135 10,000 Director St, NV Dept Business & Ind Las Vegas Monorail Proj First Tier (AMBAC Insd).......... 5.625 01/01/32 10,732,400 935 Reno, NV Cap Impt Rev (FGIC Insd).............. 5.125 06/01/26 969,623 -------------- 17,446,158 -------------- NEW HAMPSHIRE 0.2% 2,500 New Hampshire St Tpk Sys Rev Ser C Rfdg (Inverse Fltg) (FGIC Insd)..................... 10.511 11/01/17 2,688,700 -------------- NEW JERSEY 0.6% 4,000 New Jersey Econ Dev Auth Rev Motor Vehicle Sur Rev Ser A (MBIA Insd).......................... 5.000 07/01/23 4,174,120 2,760 Newark, NJ Hsg Auth Port Auth Newark Marine Term (MBIA Insd)............................... 5.500 01/01/28 2,991,260 -------------- 7,165,380 -------------- NEW YORK 2.3% 5,000 Long Island Pwr Auth NY Gen Ser A (XLCA Insd).. 5.000 12/01/26 5,224,700 5,470 New York City Hlth & Hosp Hlth Sys Ser A (FSA Insd).......................................... 5.000 02/15/21 5,685,299 11,300 New York City Sub Ser F-1 (XLCA Insd).......... 5.000 09/01/22 11,866,582 3,105 New York St Dorm Auth Rev Insd Brooklyn Law Sch Ser B (XLCA Insd) (a).......................... 5.375 07/01/21 3,344,861 -------------- 26,121,442 --------------
20 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- NORTH CAROLINA 1.6% $ 5,000 North Carolina Eastn Muni Pwr Agy Sys Rev Ser A Rfdg (AMBAC Insd).............................. 5.250% 01/01/20 $ 5,393,300 10,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd).................................... 5.250 01/01/18 10,656,300 2,735 North Carolina Muni Pwr Agy Ser A (MBIA Insd).......................................... 5.250 01/01/19 2,914,498 -------------- 18,964,098 -------------- NORTH DAKOTA 1.1% 5,000 Mercer Cnty, ND Pollutn Ctl Rev Antelope Vly Station Rfdg (AMBAC Insd)...................... 7.200 06/30/13 5,761,300 2,125 North Dakota St Brd Higher Ed Rev Hsg & Aux Fac Univ ND (FGIC Insd)............................ 5.000 04/01/32 2,190,684 5,000 Oliver Cnty, ND Pollutn Ctl Rev Square Butte Elec Coop Ser A Rfdg (AMBAC Insd).............. 5.300 01/01/27 5,241,400 -------------- 13,193,384 -------------- OHIO 0.6% 1,000 Chillicothe, OH City Sch Dist Sch Impt (FGIC Insd).......................................... 5.250 12/01/26 1,072,260 5,000 Columbus, OH City Sch Dist Sch Fac Constr & Impt (FSA Insd)................................ 5.250 12/01/27 5,353,400 -------------- 6,425,660 -------------- OKLAHOMA 3.1% 650 Claremore, OK Pub Wk Auth Elec Sys Rev (FSA Insd).......................................... 5.000 06/01/23 679,081 2,340 Claremore, OK Pub Wk Auth Util Sys Rev Rfdg (FSA Insd) (a)................................. 5.000 07/01/25 2,446,961 2,890 Jenks, OK Aquarium Auth Rev Rfdg (MBIA Insd)... 5.250 07/01/19 3,123,194 1,480 Jenks, OK Aquarium Auth Rev Rfdg (MBIA Insd)... 5.250 07/01/33 1,583,378 4,320 McAlester, OK Pub Wks Auth Util Cap Apprec Ser A (FSA Insd)................................... * 02/01/30 1,182,168 5,660 Mustang, OK Impt Auth Util Rev (FSA Insd)...... 5.800 10/01/30 6,122,082 2,020 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser A (FSA Insd)..................................... 5.000 07/01/17 2,098,517 2,400 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev (FGIC Insd).................................... 5.250 10/01/29 2,571,456 2,000 Oklahoma Colleges Brd Regt Stad Univ Cent OK Ser B (AMBAC Insd)............................. 5.500 06/01/24 2,183,260 2,995 Sallisaw, OK Muni Auth Util Sys Rev (XLCA Insd).......................................... 5.000 01/01/25 3,118,634 2,000 Tulsa, OK Cmnty College Rev (AMBAC Insd)....... 5.500 07/01/22 2,175,300 8,260 Tulsa, OK Tulsa Indl Auth Rev Univ Tulsa Ser A (MBIA Insd).................................... 5.375 10/01/31 8,718,265 -------------- 36,002,296 -------------- OREGON 0.5% 4,835 Oregon St Dept Admin Ser B Rfdg (MBIA Insd).... 5.250 05/01/17 5,151,596 --------------
See Notes to Financial Statements 21 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- PENNSYLVANIA 3.2% $ 5,000 Allegheny Cnty, PA Hosp Dev Auth Rev Insd Hlth Sys Ser A (MBIA Insd).......................... 6.500% 11/15/30 $ 5,609,150 4,875 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh Mercy Hlth Sys Inc (Escrowed to Maturity) (AMBAC Insd)................................... 5.625 08/15/26 5,187,049 3,000 Harrisburg, PA Auth Res Gtd Sub Ser D-2 (Variable Rate Coupon) (FSA Insd).............. 5.000 12/01/33 3,190,140 3,000 Lycoming Cnty, PA Auth College Rev PA College of Technology (AMBAC Insd)..................... 5.350 07/01/26 3,162,810 1,375 Pennsylvania St Higher Ed Fac Auth Rev St Sys Higher Ed Ser P (AMBAC Insd)................... 5.000 12/15/16 1,410,888 2,990 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd)............................. 5.250 08/01/18 3,167,815 4,555 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd)............................. 5.250 08/01/21 4,814,180 1,485 Philadelphia, PA Gas Wks Rev Eighteenth Ser (AGL Insd)..................................... 5.250 08/01/20 1,578,035 3,665 Philadelphia, PA Gas Wks Rev Fifth Ser A-1 (AGL Insd) (a)...................................... 5.250 09/01/17 3,916,566 5,000 State Pub Sch Bldg Auth PA Sch Lease Philadelphia Sch Dist Proj (FSA Insd).......... 5.250 06/01/26 5,293,800 -------------- 37,330,433 -------------- SOUTH CAROLINA 1.9% 2,050 Columbia, SC Ctf Partn Tourism Dev Fee Pledge (AMBAC Insd)................................... 5.250 06/01/19 2,170,848 3,325 Columbia, SC Pkg Fac Rev Ser A (CIFG Insd)..... 5.000 02/01/37 3,411,949 5,170 Easley, SC Util Rev Impt & Rfdg (FSA Insd)..... 5.000 12/01/34 5,372,561 6,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser A (AMBAC Insd)............... 5.200 11/01/27 6,872,125 4,000 South Carolina Jobs Econ Tuomey (CIFG Insd).... 5.000 11/01/30 4,121,280 -------------- 21,948,763 -------------- SOUTH DAKOTA 1.1% 715 Minnehaha Cnty, SD Ctf Ltd Tax (FSA Insd)...... 5.000 12/01/14 760,217 1,455 Rapid City, SD Sales Tax Rev Rfdg (AMBAC Insd).......................................... 5.500 06/01/12 1,568,766 5,205 South Dakota St Lease Rev Tr Ctf Ser A (FSA Insd).......................................... 6.625 09/01/12 5,857,239 4,000 South Dakota St Lease Rev Tr Ctf Ser A (FSA Insd).......................................... 6.700 09/01/17 4,859,560 -------------- 13,045,782 -------------- TEXAS 8.9% 1,165 Alamo, TX Cmnty College Dist Combined Fee Rfdg (FSA Insd)..................................... 5.000 11/01/22 1,210,155 5,000 Brazos Riv Auth TX Rev Houston Ind Inc Proj Ser C (Variable Rate Coupon) (AMBAC Insd).......... 5.125 05/01/19 5,199,600
22 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 2,000 Colorado Riv, TX Muni Wtr Dist Sys Rfdg (AMBAC Insd).......................................... 5.375% 01/01/19 $ 2,149,520 3,055 Dallas Fort Worth, TX Intl Arpt Rols RR II 291-1 (Inverse Fltg) (Acquired 07/19/04, Cost $3,448,667) (AMT) (FSA Insd) (a) (b)........... 7.673 11/01/19 3,506,071 2,000 Dallas Fort Worth, TX Intl Arpt Rols RR II 291-2 (Inverse Fltg) (Acquired 07/19/04, Cost $2,164,480) (AMT) (FSA Insd) (a) (b)........... 7.419 11/01/21 2,241,800 4,500 Harris Cnty, TX Toll Rd Sr Lien Rfdg (MBIA Insd).......................................... 5.125 08/15/17 4,626,720 4,605 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)... 5.500 07/01/17 4,959,585 2,000 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)... 5.500 07/01/18 2,154,000 2,000 Houston, TX Pub Impt Ser A Rfdg (MBIA Insd).... 5.375 03/01/18 2,161,000 7,500 Houston, TX Util Sys Rev First Lien Rfdg (FSA Insd).......................................... 5.000 11/15/27 7,804,725 22,500 Houston, TX Util Sys Rev First Lien Ser A Rfdg (FGIC Insd).................................... 5.250 05/15/23 23,975,100 7,930 Lancaster, TX Indpt Sch Dist Rfdg (FSA Insd)... 5.750 02/15/30 8,878,745 1,790 Laredo, TX Cmnty College Dist Combined Fee Rev Bldg Rfdg (AMBAC Insd)......................... 5.300 08/01/26 1,880,037 4,665 North Harris Cnty, TX Regl Wtr Sr Lien (MBIA Insd) (a)...................................... 5.000 12/15/29 4,843,110 3,000 Nueces Riv Auth TX Wtr Supply Rev Fac Corpus Christi Proj Rfdg (FSA Insd)................... 5.000 07/15/25 3,120,750 2,000 Nueces Riv Auth TX Wtr Supply Rev Fac Corpus Christi Proj Rfdg (FSA Insd)................... 5.000 03/01/27 2,075,880 2,220 Raven Hills, TX Higher Ed Corp Cardinal Vlg Llc Lamar Univ A (MBIA Insd)....................... 5.500 08/01/28 2,401,552 2,000 San Antonio, TX Hotel Occupancy Rev Sub Lien Ser A Rfdg (AMBAC Insd)........................ 5.000 08/15/29 2,055,320 1,750 Tarrant Cnty, TX Hlth Fac Dev Corp Hlth Sys Rev Ser B (Escrowed to Maturity) (FGIC Insd)....... 5.000 09/01/15 1,862,945 1,060 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA Insd).......................................... 5.250 03/01/18 1,131,084 2,000 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA Insd).......................................... 5.250 03/01/20 2,133,380 10,000 Texas St Tpk Auth Cent TX Tpk First Tier Ser A (AMBAC Insd)................................... 5.500 08/15/39 10,749,200 1,800 Tyler, TX Indpt Sch Dist (FSA Insd) (a)........ 5.000 02/15/27 1,865,808 -------------- 102,986,087 -------------- UTAH 0.3% 2,140 Murray City, UT Swr & Wtr Rev (AMBAC Insd)..... 5.250 10/01/23 2,288,965 595 Provo, UT Elec Rev 1984 Ser A Rfdg (Escrowed to Maturity) (AMBAC Insd)......................... 10.375 09/15/15 776,856 -------------- 3,065,821 --------------
See Notes to Financial Statements 23 VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- WASHINGTON 7.3% $ 4,115 Chelan Cnty, WA Sch Dist No 246 (FSA Insd)..... 5.000% 12/01/21 $ 4,280,629 2,990 Clark Cnty, WA Pub Util Dist No 001 Wtr Rev (FSA Insd)..................................... 5.125 01/01/20 3,128,108 11,340 Energy Northwest WA Elec Rev Columbia Generating Ser A Rfdg (FSA Insd)............... 5.500 07/01/17 12,266,024 4,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)................................ 5.500 07/01/17 4,867,470 14,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)................................ 5.500 07/01/18 15,684,070 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser B Rfdg (FSA Insd)................................ 6.000 07/01/16 5,577,050 1,365 Energy Northwest WA Wind Proj (AMBAC Insd)..... 5.000 07/01/23 1,406,605 5,540 Everett, WA Wtr & Swr Rev (MBIA Insd).......... 5.000 12/01/29 5,770,298 1,215 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)......... 5.000 04/01/24 1,262,470 1,895 Fife, WA Wtr & Swr Rev (MBIA Insd)............. 5.125 04/01/24 1,906,939 1,160 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)......... 5.000 04/01/29 1,199,788 2,500 Goat Hill Ppty WA Lease Rev Govt Office Bldg Proj (MBIA Insd)............................... 5.000 12/01/33 2,567,950 1,025 Grant Cnty, WA Pub Util Dist No 2 Rev Second Ser C Rfdg (AMBAC Insd) (a).................... 6.000 01/01/17 1,052,911 2,000 Port Seattle, WA Rev Inter Lien Ser A Rfdg (MBIA Insd).................................... 5.000 03/01/28 2,076,440 3,000 Port Seattle, WA Rev Inter Lien Ser A Rfdg (MBIA Insd).................................... 5.000 03/01/35 3,092,370 2,000 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA Insd).......................................... 5.500 03/01/18 2,133,080 2,565 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.500 12/01/23 2,769,661 145 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.000 12/01/24 149,759 2,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/25 2,214,120 2,420 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/26 2,673,906 3,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.250 09/01/33 3,157,260 1,465 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC Insd).......................................... 5.375 12/01/18 1,565,001 2,075 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC Insd) (a)...................................... 5.375 12/01/19 2,216,640 1,600 Washington St Ser R 99A Rfdg (FGIC Insd)....... 5.000 01/01/17 1,643,488 -------------- 84,662,037 -------------- WEST VIRGINIA 0.1% 1,530 West Virginia Econ Dev Auth Lease Rev Correctional Juvenile & Pub-A (MBIA Insd)...... 5.500 06/01/19 1,664,915 -------------- WISCONSIN 0.5% 1,350 Plover, WI Wtr Sys Rev (AMBAC Insd) (a)........ 5.400 12/01/16 1,425,006 1,500 Plover, WI Wtr Sys Rev (AMBAC Insd) (a)........ 5.500 12/01/18 1,585,740
24 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ----------------------------------------------------------------------------------------------- WISCONSIN (CONTINUED) $ 1,405 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd) (a)............................................ 5.250% 09/01/16 $ 1,496,901 750 Wilmot, WI Un High Sch Dist Ser B Rfdg (FSA Insd).......................................... 5.000 03/01/23 792,315 -------------- 5,299,962 -------------- PUERTO RICO 0.3% 3,000 Puerto Rico Indl Tourist Ed Med & Environmental Ctl Fac Hosp Aux (MBIA Insd)................... 6.250 07/01/16 3,036,600 -------------- TOTAL LONG-TERM INVESTMENTS 95.9% (Cost $1,070,087,256)....................................................... 1,110,708,136 SHORT-TERM INVESTMENTS 4.0% (Cost $46,440,000).......................................................... 46,440,000 -------------- TOTAL INVESTMENTS 99.9% (Cost $1,116,527,256)....................................................... 1,157,148,136 OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%................................... 608,433 -------------- NET ASSETS 100.0%............................................................ $1,157,756,569 ==============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) The Fund owns 100% of the outstanding bond issuance. (b) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 4.5% of net assets. (c) Security purchased on a when-issued or delayed delivery basis. (d) Security converts to a fixed coupon rate at a predetermined date. (e) All or a portion of these securities have been physically segregated in connection with open futures contracts. (f) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. AGL--Assured Guaranty Ltd. AMBAC--AMBAC Indemnity Corp. 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 PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued FUTURES CONTRACTS OUTSTANDING AS OF MARCH 31, 2006:
UNREALIZED APPRECIATION/ SHORT CONTRACTS: CONTRACTS DEPRECIATION U.S. Treasury Notes 5-Year Futures June 2006 (Current Notional Value of $104,438 per contract)......... 1,928 $813,046 ----- --------
SWAP AGREEMENT OUTSTANDING AS OF MARCH 31, 2006:
PAY/ INTEREST RATE SWAP RECEIVE NOTIONAL UNREALIZED FLOATING FIXED EXPIRATION AMOUNT APPRECIATION/ COUNTERPARTY FLOATING RATE INDEX RATE RATE DATE (000) DEPRECIATION JP Morgan Chase Bank USD-BMA Municipal N.A. Swap Index Receive 4.137% 06/28/26 32,540 $474,497 ------ --------
26 See Notes to Financial Statements VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2006 (Unaudited) ASSETS: Total Investments (Cost $1,116,527,256)..................... $1,157,148,136 Cash........................................................ 450,733 Receivables: Interest.................................................. 14,705,064 Investments Sold.......................................... 4,424,993 Fund Shares Sold.......................................... 209,146 Swap Contracts.............................................. 474,497 Other....................................................... 280,600 -------------- Total Assets............................................ 1,177,693,169 -------------- LIABILITIES: Payables: Investments Purchased..................................... 16,265,667 Fund Shares Repurchased................................... 1,258,406 Income Distributions...................................... 841,035 Investment Advisory Fee................................... 502,233 Distributor and Affiliates................................ 401,585 Variation Margin on Futures............................... 90,375 Trustees' Deferred Compensation and Retirement Plans........ 353,377 Accrued Expenses............................................ 223,922 -------------- Total Liabilities....................................... 19,936,600 -------------- NET ASSETS.................................................. $1,157,756,569 ============== NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $1,107,589,281 Net Unrealized Appreciation................................. 41,908,423 Accumulated Net Realized Gain............................... 7,256,179 Accumulated Undistributed Net Investment Income............. 1,002,686 -------------- NET ASSETS.................................................. $1,157,756,569 ============== MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $1,083,956,893 and 58,910,494 shares of beneficial interest issued and outstanding)............. $ 18.40 Maximum sales charge (4.75%* of offering price)......... .92 -------------- Maximum offering price to public........................ $ 19.32 ============== Class B Shares: Net asset value and offering price per share (Based on net assets of $50,200,564 and 2,731,523 shares of beneficial interest issued and outstanding)............. $ 18.38 ============== Class C Shares: Net asset value and offering price per share (Based on net assets of $21,862,552 and 1,190,645 shares of beneficial interest issued and outstanding)............. $ 18.36 ============== Class I Shares: Net asset value and offering price per share (Based on net assets of $1,736,560 and 94,381 shares of beneficial interest issued and outstanding)........................ $ 18.40 ==============
* On sales of $100,000 or more, the sales charge will be reduced. See Notes to Financial Statements 27 VAN KAMPEN INSURED TAX FREE INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2006 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 27,728,659 ------------ EXPENSES: Investment Advisory Fee..................................... 2,970,017 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $1,329,112, $264,954 and $110,034, respectively)............................................. 1,704,100 Shareholder Services........................................ 346,959 Custody..................................................... 60,057 Legal....................................................... 52,594 Trustees' Fees and Related Expenses......................... 23,651 Other....................................................... 268,851 ------------ Total Expenses.......................................... 5,426,229 Less Credits Earned on Cash Balances.................... 32,537 ------------ Net Expenses............................................ 5,393,692 ------------ NET INVESTMENT INCOME....................................... $ 22,334,967 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 6,071,101 Futures................................................... 6,223,021 ------------ Net Realized Gain........................................... 12,294,122 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 60,107,152 ------------ End of the Period: Investments............................................. 40,620,880 Futures................................................. 813,046 Swap Contracts.......................................... 474,497 ------------ 41,908,423 ------------ Net Unrealized Depreciation During the Period............... (18,198,729) ------------ NET REALIZED AND UNREALIZED LOSS............................ $ (5,904,607) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 16,430,360 ============
28 See Notes to Financial Statements 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, 2006 SEPTEMBER 30, 2005 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 22,334,967 $ 45,435,392 Net Realized Gain.................................... 12,294,122 18,143,294 Net Unrealized Depreciation During the Period........ (18,198,729) (18,879,056) -------------- -------------- Change in Net Assets from Operations................. 16,430,360 44,699,630 -------------- -------------- Distributions from Net Investment Income: Class A Shares..................................... (20,871,862) (43,893,696) Class B Shares..................................... (809,247) (1,921,231) Class C Shares..................................... (336,305) (636,583) Class I Shares..................................... (36,935) (9,817) -------------- -------------- (22,054,349) (46,461,327) -------------- -------------- Distributions from Net Realized Gain: Class A Shares..................................... (22,486,062) (10,259,399) Class B Shares..................................... (1,089,279) (577,204) Class C Shares..................................... (456,473) (180,088) Class I Shares..................................... (37,990) -0- -------------- -------------- (24,069,804) (11,016,691) -------------- -------------- Total Distributions.................................. (46,124,153) (57,478,018) -------------- -------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... (29,693,793) (12,778,388) -------------- -------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 37,460,475 76,930,648 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 37,455,488 44,697,062 Cost of Shares Repurchased........................... (81,510,094) (138,280,579) -------------- -------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (6,594,131) (16,652,869) -------------- -------------- TOTAL DECREASE IN NET ASSETS......................... (36,287,924) (29,431,257) NET ASSETS: Beginning of the Period.............................. 1,194,044,493 1,223,475,750 -------------- -------------- End of the Period (Including accumulated undistributed net investment income of $1,002,686 and $722,068, respectively)........................ $1,157,756,569 $1,194,044,493 ============== ==============
See Notes to Financial Statements 29 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 MARCH 31, -------------------------------------------------------- 2006 2005 2004 2003 2002 (b) 2001 ---------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD............ $ 18.87 $ 19.07 $ 19.27 $ 19.65 $ 19.22 $ 18.27 -------- -------- -------- -------- -------- -------- Net Investment Income.... .36(a) .72 .76 .77 .81 .86 Net Realized and Unrealized Gain/Loss... (.10) (.01) .02 (.23) .87 .98 -------- -------- -------- -------- -------- -------- Total from Investment Operations............... .26 .71 .78 .54 1.68 1.84 -------- -------- -------- -------- -------- -------- Less: Distributions from Net Investment Income...... .35 .74 .75 .74 .81 .89 Distributions from Net Realized Gain.......... .38 .17 .23 .18 .44 -0- -------- -------- -------- -------- -------- -------- Total Distributions........ .73 .91 .98 .92 1.25 .89 -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD................... $ 18.40 $ 18.87 $ 19.07 $ 19.27 $ 19.65 $ 19.22 ======== ======== ======== ======== ======== ======== Total Return (c)........... 1.45%* 3.77% 4.22% 2.90% 9.28% 10.28% Net Assets at End of the Period (In millions)..... $1,084.0 $1,114.2 $1,137.2 $1,209.9 $1,244.3 $1,129.6 Ratio of Expenses to Average Net Assets....... .87% .88% .87% .86% .87% .90% Ratio of Net Investment Income to Average Net Assets................... 3.86% 3.81% 3.99% 4.02% 4.30% 4.55% Portfolio Turnover......... 24%* 66% 40% 61% 54% 80%
* Non-Annualized (a) Based on average shares outstanding. (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 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. (c) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 B MARCH 31, ------------------------------------------------ 2006 2005 2004 2003 2002 (b) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $18.85 $19.05 $19.24 $19.63 $19.20 $18.26 ------ ------ ------ ------ ------ ------ Net Investment Income............ .29(a) .59 .62 .63 .66 .70 Net Realized and Unrealized Gain/ Loss........................... (.10) (.02) .02 (.24) .88 .99 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .19 .57 .64 .39 1.54 1.69 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .28 .60 .60 .60 .67 .75 Distributions from Net Realized Gain........................... .38 .17 .23 .18 .44 -0- ------ ------ ------ ------ ------ ------ Total Distributions................ .66 .77 .83 .78 1.11 .75 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $18.38 $18.85 $19.05 $19.24 $19.63 $19.20 ====== ====== ====== ====== ====== ====== Total Return (c)................... 1.07%* 3.04% 3.43% 2.08% 8.47% 9.42% Net Assets at End of the Period (In millions)........................ $ 50.2 $ 56.2 $ 66.4 $ 82.6 $ 87.2 $ 49.2 Ratio of Expenses to Average Net Assets........................... 1.63% 1.64% 1.63% 1.62% 1.63% 1.69% Ratio of Net Investment Income to Average Net Assets............... 3.10% 3.05% 3.23% 3.26% 3.53% 3.76% Portfolio Turnover................. 24%* 66% 40% 61% 54% 80%
* Non-Annualized (a) Based on average shares outstanding. (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 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. (c) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 31 VAN KAMPEN 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 MARCH 31, ------------------------------------------------ 2006 2005 2004 2003 2002 (b) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $18.84 $19.04 $19.23 $19.62 $19.19 $18.25 ------ ------ ------ ------ ------ ------ Net Investment Income............ .29(a) .58 .62 .63 .67 .69 Net Realized and Unrealized Gain/Loss...................... (.11) (.01) .02 (.24) .87 1.00 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .18 .57 .64 .39 1.54 1.69 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .28 .60 .60 .60 .67 .75 Distributions from Net Realized Gain........................... .38 .17 .23 .18 .44 -0- ------ ------ ------ ------ ------ ------ Total Distributions................ .66 .77 .83 .78 1.11 .75 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $18.36 $18.84 $19.04 $19.23 $19.62 $19.19 ====== ====== ====== ====== ====== ====== Total Return (c)................... 1.02%* 3.04% 3.43% 2.08% 8.48% 9.42% Net Assets at End of the Period (In millions)........................ $ 21.9 $ 21.7 $ 19.9 $ 24.1 $ 22.1 $ 11.2 Ratio of Expenses to Average Net Assets........................... 1.63% 1.64% 1.63% 1.62% 1.63% 1.65% Ratio of Net Investment Income to Average Net Assets............... 3.10% 3.05% 3.23% 3.25% 3.53% 3.80% Portfolio Turnover................. 24%* 66% 40% 61% 54% 80%
* Non-Annualized (a) Based on average shares outstanding. (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 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. (c) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 32 See Notes to Financial Statements VAN KAMPEN 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 AUGUST 12, 2005 ENDED (COMMENCEMENT OF CLASS I MARCH 31, OPERATIONS) TO 2006 SEPTEMBER 30, 2005 -------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $18.87 $18.93 ------ ------ Net Investment Income..................................... .38(a) .10 Net Realized and Unrealized Loss.......................... (.09) (.06) ------ ------ Total from Investment Operations............................ .29 .04 ------ ------ Less: Distributions from Net Investment Income.................. .38 .10 Distributions from Net Realized Gain...................... .38 -0- ------ ------ Total Distributions......................................... .76 .10 ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $18.40 $18.87 ====== ====== Total Return (b)............................................ 1.58%* 0.20%* Net Assets at End of the Period (In millions)............... $ 1.7 $ 1.9 Ratio of Expenses to Average Net Assets..................... .63% .64% Ratio of Net Investment Income to Average Net Assets........ 4.10% 4.06% Portfolio Turnover.......................................... 24%* 66%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period. This return does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. See Notes to Financial Statements 33 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class-specific expenses and voting rights on matters affecting a single class. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. 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, 2006, the Fund had $12,153,897 when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies 34 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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, 2006, the cost and related gross unrealized appreciation and depreciation were as follows: Cost of investments for tax purposes........................ $1,115,802,593 ============== Gross tax unrealized appreciation........................... $ 43,926,309 Gross tax unrealized depreciation........................... (2,580,766) -------------- Net tax unrealized appreciation on investments.............. $ 41,345,543 ==============
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, 2005 was as follows: Distributions paid from: Ordinary Income........................................... $ 1,834,335 Long-term capital gain.................................... 9,269,523 ----------- $11,103,858 ===========
As of September 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 5,035,342 Undistributed long-term capital gain........................ 15,304,816
Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of the deferral of losses relating to wash sale transactions. 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, 2006, the Fund's custody fee was reduced by $32,537 as a result of credits earned on cash balances. 35 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .525% Next $500 million........................................... .500% Next $500 million........................................... .475% Over $1.5 billion........................................... .450%
For the six-months ended March 31, 2006, the Fund recognized expenses of approximately $16,000 representing legal expenses provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment agreements, the Adviser provides accounting and legal services and the CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the six-months ended March 31, 2006, the Fund recognized expenses of approximately $67,800, representing Van Kampen Investment Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six-months ended March 31, 2006, the Fund recognized expenses of approximately $280,400, 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 $247,903 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2006. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligations and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. For the six-months ended March 31, 2006, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $90,600 and 36 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued CDSC on redeemed shares of approximately $29,800. Sales charges do not represent expenses of the Fund. 3. CAPITAL TRANSACTIONS For the six-months ended March 31, 2006 and year ended September 30, 2005, transactions were as follows:
FOR THE FOR THE SIX MONTH ENDED YEAR ENDED MARCH 31, 2006 SEPTEMBER 30, 2005 -------------------------- --------------------------- SHARES VALUE SHARES VALUE Sales: Class A.......................... 1,795,795 $ 33,458,989 3,391,018 $ 64,402,543 Class B.......................... 82,220 1,530,745 254,051 4,816,384 Class C.......................... 128,101 2,386,270 298,578 5,659,465 Class I.......................... 4,499 84,471 108,413 2,052,256 ---------- ------------ ---------- ------------- Total Sales........................ 2,010,615 $ 37,460,475 4,052,060 $ 76,930,648 ========== ============ ========== ============= Dividend Reinvestment: Class A.......................... 1,913,973 $ 35,422,323 2,239,715 $ 42,453,709 Class B.......................... 73,427 1,356,915 87,830 1,662,581 Class C.......................... 32,573 601,334 30,180 570,946 Class I.......................... 4,046 74,916 519 9,826 ---------- ------------ ---------- ------------- Total Dividend Reinvestment........ 2,024,019 $ 37,455,488 2,358,244 $ 44,697,062 ========== ============ ========== ============= Repurchases: Class A.......................... (3,834,577) $(71,376,897) (6,212,732) $(117,927,260) Class B.......................... (405,805) (7,552,569) (844,830) (16,033,908) Class C.......................... (124,525) (2,313,297) (219,186) (4,154,336) Class I.......................... (14,379) (267,331) (8,717) (165,075) ---------- ------------ ---------- ------------- Total Repurchases.................. (4,379,286) $(81,510,094) (7,285,465) $(138,280,579) ========== ============ ========== =============
4. REDEMPTION FEES The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within seven days of purchase. The redemption fee is paid directly to the Fund. For the six-months ended March 31, 2006, the Fund received redemption fees of approximately $800, which are reported as part of "Cost of Shares Repurchased" in the Statement of Changes in Net Assets. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $269,124,160 and $293,663,148, respectively. 6. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. 37 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 and to manage the portfolio's effective yield, maturity and duration. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In 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, 2006, were as follows:
CONTRACTS Outstanding at September 30, 2005........................... 2,992 Futures Opened.............................................. 8,580 Futures Closed.............................................. (9,644) ------ Outstanding at March 31, 2006............................... 1,928 ======
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. C. INTEREST RATE SWAPS The Fund may enter into interest rate swaps primarily to preserve a return or spread on a particular investment or portion of its portfolio, as a duration management technique or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps are contractual agreements to exchange periodic interest payment streams calculated on a predetermined notional principal amount. Interest rate swaps generally involve one party paying a fixed interest rate and the other party paying a variable rate. The Fund will usually enter into swaps on a net basis, i.e, the two payment streams are netted out in a cash settlement on the payment date or dates 38 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued specified in the instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. The Fund accrues the net amount with respect to each swap on a daily basis. This net amount is recorded within unrealized appreciation/depreciation on swap contracts. Upon cash settlement of the periodic payments, the net amount is recorded as realized gain/loss on swap contracts on the Statement of Operations. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. If there is a default by the counterparty, the Fund will have contractual remedies pursuant to the agreements related to the transaction. 7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate the Distributor for the distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $1,232,900 and $67,400 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 9. LEGAL MATTERS The Adviser, 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 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. Plaintiffs filed a Motion for Leave to file a Supplemental Pleading that would, among other things, expand the allegations and alleged class. The defendants moved to dismiss this action, which motion was granted in its entirety. Additionally, 39 VAN KAMPEN INSURED TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued plaintiffs' Motion for Leave to file a Supplemental Pleading was denied. This matter is now concluded. 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 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. Additionally, plaintiff's initial complaint regarding allegations of economic incentives was stayed pending certain procedural developments. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. Defendants' motion to dismiss in the market timing litigation was granted in part and denied in part, and defendants filed a motion for reconsideration of the Court's decision to uphold certain of plaintiff's claims. Additionally, plaintiff and the named Trustees entered into a tolling agreement. The tolling agreement dismisses the Trustees from the action without prejudice in exchange for tolling all claims against the Trustees. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 40 VAN KAMPEN INSURED TAX FREE INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer J. DAVID GERMANY Vice President DENNIS SHEA Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer PHILLIP G. GOFF Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 41 Van Kampen Insured Tax Free Income Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen Insured Tax Free Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen Insured Tax Free Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 32, 332, 532 TFIN SAR 5/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RA06-00369P-Y03/06 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Strategic Municipal Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2006. 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 3/31/06
A SHARES B SHARES C SHARES 6/28/85 4/30/93 8/13/93 - --------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES Since Inception 6.60% 6.35% 4.95% 4.95% 4.56% 4.56% 10-year 5.07 4.56 4.50 4.50 4.34 4.34 5-year 5.87 4.84 5.08 4.83 5.22 5.22 1-year 7.14 2.09 6.36 2.36 6.38 5.38 6-month 3.40 -1.52 2.94 -1.06 2.99 1.99 - --------------------------------------------------------------------------------------------- SEC Yield 4.70% 4.17% 4.13%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in year one and declining to zero after year six), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares seven years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006 MARKET CONDITIONS Despite the shadow of rising oil prices, the devastation of the Gulf Coast hurricanes, and emerging weakness in the housing market, the economy continued to grow during the six-month period ended March 31, 2006. This expansion was more modest in the fourth quarter of 2005, but gained momentum in the first quarter of 2006. Against the backdrop of growth and good employment data, the Federal Open Market Committee (the "Fed") continued raising the federal funds target rate during the period, implementing four additional increases of 25 basis points each. The final hike of the period represented the fifteenth consecutive increase--the longest stretch of increases in 25 years. As the period came to a close, market observers speculated about the Fed's near-term intentions. The Fed noted that although longer-term inflation appeared contained, commodity prices could amplify inflationary pressures. Returns across the municipal bond market varied significantly. As investors sought income opportunities, lower rated bonds outpaced investment-grade bonds by a wide margin. Long-term bonds earned the best returns, broadly speaking, while bonds in the three-to-seven year range posted the most muted gains. Municipal bond issuance was robust during the final months of 2005. (In fact, 2005 marked a record high for municipal bond volume.) The tide changed in the first quarter of 2006, however. As rising rates discouraged issuers from refinancing debt, national municipal issuance dropped by approximately 30 percent versus the same period a year ago. While supply ebbed, the market's appetite for municipal bonds remained strong, with particularly heavy demand from high yield municipal bond funds. 2 PERFORMANCE ANALYSIS The fund returned 3.40 percent for the six months ended March 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 0.98 percent for the period. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006
- ------------------------------------------------------------------- LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX 3.40% 2.94% 2.99% 0.98% - -------------------------------------------------------------------
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. Throughout the period, our rigorous security-specific fundamental research drove the fund's portfolio construction process. We also evaluated broader market conditions, including issuance and supply/demand trends in order to manage the fund's risk/reward characteristics. The fund's allocation to high yield bonds was an especially significant driver of outperformance during the period relative to the Lehman benchmark. As credit spreads narrowed and investors sought yield in an environment of low rates, the fund's high yield holdings were well positioned to appreciate. (Credit spreads measure the added compensation investors require to assume risk. When credit spreads tighten, bonds with lower credit ratings generally outperform higher quality bonds.) Decreasing high yield bond issuance in the first quarter of 2006, coupled with steep demand, served as an additional catalyst to drive up the fund's high-yield holdings. Exposure to special facility airline bonds proved especially advantageous. (These bonds are typically secured by lease payments from airlines, while airport authorities have ownership rights to the facilities.) Increased air travel has not been met by a corresponding increase in capacity, creating a favorable supply-demand scenario for the airline facilities. Moreover, spreads tightened significantly in this sector, particularly during the first quarter of 2006. Although spreads did not narrow as significantly in the health care and special tax district sectors, the fund's holdings in those areas also contributed to performance. Tobacco master settlement revenue bonds also buoyed the fund's income as well. The litigation environment for tobacco companies currently appears to be generally favorable, and the tobacco industry has continued to prosper. 3 The fund also held inverse floating rate securities. The yields of inverse floaters move in the opposite direction as interest rates, and served the fund well when long-term bonds rallied over the course of the period. While the fund outperformed the benchmark, not all areas proved equally advantageous. The fund's holdings in higher education and affordable senior housing tempered the fund's overall pace; and a handful of issues declined due to security-specific reasons. The fund has the flexibility to invest in bonds across the credit quality spectrum, including in non-rated securities. We seek to generate a compelling total return and yield, with close attention to risk management. As of the close of the reporting period, 18 percent of the fund's bonds were rated A- or higher. 82 percent of the fund's bonds were rated between BBB+ and B- or were non-rated bonds that we believed to be of comparable credit quality. The fund was well diversified across the municipal bond market. Hospitals, life care facilities and special tax districts represented the largest sector weightings as of March 31, 2006. We closely manage the growth of the fund's asset base as an important part of our commitment to the fund's existing shareholders. Based on our analysis of the supply and demand trends in the market, we believed the prudent course was to keep the fund closed to new investors during the period. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. 4
RATINGS ALLOCATIONS AS OF 3/31/06 AAA/Aaa 7.6% AA/Aa 4.3 A/A 6.2 BBB/Baa 11.9 BB/Ba 2.7 B/B 8.1 Non-Rated 59.2 TOP FIVE SECTORS AS OF 3/31/06 Hospital 18.6% Life Care 16.3 Special Tax Districts 13.1 Air Carriers 10.2 Tax Allocation/Increment 4.6 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/06 Florida 10.0% California 9.3 Texas 9.3 New York 8.1 Illinois 7.1 New Jersey 5.7 Pennsylvania 4.5 Missouri 4.0 Ohio 3.4 Oklahoma 3.4 Minnesota 3.1 Arizona 2.9 Colorado 2.7 Massachusetts 2.6 Michigan 2.5 Virginia 1.8 Tennessee 1.6 Georgia 1.4 Maryland 1.4 South Carolina 1.3 Puerto Rico 1.3 Wisconsin 1.1 Iowa 0.9 Indiana 0.9 Louisiana 0.8 Oregon 0.8 Alabama 0.8 New Hampshire 0.7 Washington 0.7 Nevada 0.5 South Dakota 0.5 New Mexico 0.5 Hawaii 0.5 Connecticut 0.5 Kansas 0.4
(continued on next page)
5
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/06 (continued from previous page) Rhode Island 0.4 Wyoming 0.4 Alaska 0.3 North Carolina 0.3 U.S. Virgin Islands 0.2 Utah 0.2 Vermont 0.2 Idaho 0.2 Delaware 0.2 North Dakota 0.2 District of Columbia 0.1 Mississippi 0.0* ----- Total Investments 99.7% Other Assets in Excess of Liabilities 0.3 ----- Total Net Assets 100.0%
* Amount is less than 0.1% Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings allocations are as a percentage of long-term investments. Sectors are as a percentage of total investments. Summary of investments by state classification is as a percentage of total net assets. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 6 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters 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 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 7 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 8 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales 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 10/01/05 - 03/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. 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* --------------------------------------------------- 10/01/05 03/31/06 10/01/05-03/31/06 Class A Actual................................... $1,000.00 $1,033.95 $4.21 Hypothetical............................. 1,000.00 1,020.83 4.18 (5% annual return before expenses) Class B Actual................................... 1,000.00 1,029.36 7.99 Hypothetical............................. 1,000.00 1,017.03 7.95 (5% annual return before expenses) Class C Actual................................... 1,000.00 1,029.86 8.00 Hypothetical............................. 1,000.00 1,017.03 7.95 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.83%, 1.58%, and 1.58% 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. 9 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MUNICIPAL BONDS 99.7% ALABAMA 0.8% $ 1,000 Alabama Drinking Wtr Fin Auth Revolving Fd Ln Ser C (AMBAC Insd)...................... 5.750% 08/15/18 $ 1,082,930 2,000 Alabama Drinking Wtr Fin Auth Revolving Fd Ln Ser C (AMBAC Insd)...................... 5.375 08/15/23 2,122,820 2,000 Alabama Wtr Pollutn Ctl Auth (AMBAC Insd)............................... 5.750 08/15/18 2,156,660 1,000 Butler, AL Indl Dev Brd Solid GA Pacific Corp Proj Rfdg (AMT)....................... 5.750 09/01/28 1,000,930 1,500 Colbert Cnty Northwest Auth Hlthcare Fac... 5.750 06/01/27 1,532,685 250 Huntsville Redstone Vlg, AL Spl Care Fac Fin Auth Ser A............................. 8.250 12/01/32 237,737 2,500 Huntsville/Carlton Cove, AL Carlton Cove Inc Proj Ser A............................. 7.000 11/15/17 1,261,400 3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev Mobile Energy Svc Co Proj Rfdg......... 6.950 01/01/20 294 1,395 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem Hosp Ser A............................. 5.600 11/01/16 1,424,197 1,750 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem Hosp Ser A............................. 5.650 11/01/22 1,781,815 -------------- 12,601,468 -------------- ALASKA 0.3% 1,405 Alaska Indl Dev & Expt Auth Williams Lynxs AK Cargoport (AMT) (Acquired 05/17/01, Cost $1,405,000) (a)............................ 7.800 05/01/14 1,368,315 3,890 Juneau, AK City & Borough Rev Saint Anns Care Ctr Proj.............................. 6.875 12/01/25 3,825,776 -------------- 5,194,091 -------------- ARIZONA 2.9% 2,000 Arizona Hlth Fac Auth Hosp Sys Rev John C Lincoln Hlth Network (Prerefunded @ 12/01/12)................... 6.375 12/01/37 2,296,860 1,000 Arizona Hlth Fac Auth Rev Terraces Proj Ser A...................................... 7.500 11/15/23 1,123,970 1,250 Arizona Hlth Fac Auth Rev Terraces Proj Ser A...................................... 7.750 11/15/33 1,408,225 5,770 Cochise Cnty, AZ Indl Dev Sierra Vista Cmnty Hosp Ser A Rfdg...................... 6.750 12/01/26 5,920,078 990 Flagstaff, AZ Indl Dev Auth Rev Sr Living Cmnty Northn AZ Proj....................... 7.500 03/01/35 1,076,447 500 Flagstaff, AZ Indl Dev Auth Rev Sr Living Cmnty Northn AZ Proj....................... 6.300 09/01/38 501,950 7,000 Glendale, AZ Indl Dev Auth Rfdg............ 5.000 12/01/35 7,039,550 4,000 Maricopa Cnty, AZ Hlth Fac Rev Catholic Hlthcare West Ser A........................ 5.500 07/01/26 4,184,400
10 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- ARIZONA (CONTINUED) $ 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) (b).................................... 6.625% 07/01/33 $ 3,102,560 2,290 Maricopa Cnty, AZ Indl Dev Christian Care Mesa Inc Proj Ser A (Prerefunded @ 04/01/07)................... 7.750 04/01/15 2,418,904 2,000 Maricopa Cnty, AZ Indl Dev Christian Care Mesa Inc Proj Ser A (Prerefunded @ 04/01/07)................... 7.875 04/01/27 2,114,600 1,500 Peoria, AZ Indl Dev Auth Rev Sierra Winds Life Ser A Rfdg............................ 6.375 08/15/29 1,553,340 1,865 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac Milestones Charter Sch Proj................ 6.750 11/01/33 1,888,051 1,590 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac P.L.C Charter Sch Proj (c)................. 6.500 04/01/26 1,590,000 2,805 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac P.L.C Charter Sch Proj (c)................. 6.750 04/01/36 2,805,000 4,225 Pima Cnty, AZ Indl Dev Auth Ed Rev Fac Premier & Air Co........................... 7.000 09/01/35 4,228,971 800 Pima Cnty, AZ Indl Dev Auth Fac Skyline Tech High Sch Proj......................... 7.500 02/01/34 807,344 1,000 Pima Cnty, AZ Indl Dev Auth Rev La Posada at Park Ctr Ser A.......................... 7.000 05/15/27 1,034,350 815 Red Hawk Canyon Cmnty Fac Dist No 2 AZ Dist Assmt Rev.................................. 6.500 12/01/12 825,440 2,095 Tucson, AZ Multi-Family Rev Hsg Catalina Asstd Living Ser A (AMT)................... 6.500 07/01/31 1,798,118 -------------- 47,718,158 -------------- CALIFORNIA 9.3% 1,000 ABAG Fin Auth Nonprofit Corp CA Amern Baptist Homes Ser A Rfdg................... 5.850 10/01/27 1,002,600 1,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.600 09/01/25 1,057,290 2,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.650 09/01/30 2,109,640 2,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.700 09/01/35 2,087,120 1,000 Beaumont, CA Fin Auth Loc Agy Ser D........ 5.800 09/01/35 1,057,220 1,000 Blythe, CA Redev Agy Proj.................. 5.750 05/01/34 1,047,850 1,000 Brentwood, CA Infrastructure Auth Rev...... 5.875 09/02/34 1,030,430 15,000 California Hlth Fac Fin Auth Rev Cedars Sinai Med Ctr Rfdg......................... 5.000 11/15/34 15,222,450 3,000 California Pollutn Ctl Fin Auth Solid Waste Disp Rev Solid Waste Mgmt Inc Proj Ser A 2 (AMT).............................. 5.400 04/01/25 3,126,630 6,150 California St Drivers Ser 1267 (Inverse Fltg) (Acquired 03/14/06, Cost $7,554,537) (a) (d).................................... 10.577 02/01/12 7,470,651 5,000 California St Rites Pa 1366 (Inverse Fltg) (Acquired 03/23/06, Cost $6,244,600) (a) (d)........................................ 8.952 11/01/26 6,171,300
See Notes to Financial Statements 11 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $ 1,000 California Statewide Cmnty Dev Auth Elder Care Alliance Ser A........................ 8.250% 11/15/32 $ 1,063,150 940 California Statewide Cmnty Dev Auth Multi-Family Rev Hsg Heritage Pointe Sr Apt Ser QQ (AMT) (Acquired 02/19/02, Cost $937,650), (a)........................ 7.500 10/01/26 976,904 1,675 California Statewide Cmnty Dev Auth Rev Daughters of Charity Hlth Ser A............ 5.250 07/01/35 1,717,428 1,250 California Statewide Cmnty Dev Auth Rev Daughters of Charity Hlth Ser A............ 5.000 07/01/39 1,244,675 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 1,007,190 1,000 Chino, CA Cmnty Fac Dist No 03 Impt Area 1.......................................... 5.700 09/01/29 1,045,540 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd)..... * 09/01/17 2,417,400 1,500 Corona-Norco, CA Univ Sch Dist Pub Fin Auth Spl Tax Rev Ser A.......................... 5.800 09/01/35 1,548,285 2,300 Foothill/Eastern Tran Corridor Agy CA Toll Rd Rev (MBIA Insd)......................... * 01/15/18 1,275,074 15,000 Golden St Tob Securitization Corp CA Tob Settlement Rev Rols RR II R 448CE (Inverse Fltg) (Acquired 11/10/05, Cost $14,652,000) (a) (d).................................... 6.598 06/01/45 15,516,750 800 Golden St Tob Securitization Corp CA Tob Settlement Ser 2003 A-1.................... 6.750 06/01/39 896,936 1,750 Huntington Beach, CA Cmnty No 2003 1 Huntington Ctr........................... 5.800 09/01/23 1,807,522 885 Indio, CA Pub Fin Auth Rev Tax Increment (Prerefunded @ 08/15/06)................... 6.500 08/15/27 908,364 2,000 Indio, CA Redev Agy Tax Alloc Sub Merged Proj Area Ser B............................ 6.375 08/15/33 2,165,480 500 Indio, CA Redev Agy Tax Alloc Sub Merged Proj Area Ser B............................ 6.500 08/15/34 545,935 1,000 Jurupa, CA Cmnty Svc Dist Spl Cmnty Fac Dist No 4 Ser A............................ 5.700 09/01/34 1,031,980 1,825 Lake Elsinore, CA Pub Fin Auth Loc Agy Rev Ser F...................................... 7.100 09/01/20 1,931,708 2,500 Lake Elsinore, CA Spl Tax Cmnty Fac Dist 2 Area AA.................................... 5.450 09/01/36 2,549,725 1,000 Lee Lake Wtr Dist CA Cmnty Fac Dist No 1 Spl Tax Sycamore Creek..................... 6.000 09/01/33 1,067,750 1,000 Lincoln, CA Spl Tax Cmnty Fac Dist No 2003 Ser 1...................................... 6.000 09/01/34 1,067,750 1,750 Los Angeles, CA Regl Arpt Impt Corp Lease Rev Fac Sublease LA Intl Ser A-1 Rfdg...... 7.125 12/01/24 1,840,317
12 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $17,440 Los Angeles, CA Regl Arpt Impt Corp Lease Rev Ser C (AMT)............................ 7.500% 12/01/24 $ 18,615,282 1,410 Millbrae, CA Residential Fac Rev Magnolia of Millbrae Proj Ser A (AMT)............... 7.375 09/01/27 1,470,263 1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks Impt Area A................................ 5.900 09/01/27 1,060,810 1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks Impt Area A................................ 6.000 09/01/34 1,061,970 1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks Impt Area B................................ 6.000 09/01/27 1,067,610 3,000 Northstar Cmnty Svc Dist CA Spl Tax Cmnty Fac Dist No 1.............................. 5.450 09/01/28 3,056,040 1,000 Palmdale, CA Spl Tax Cmnty Fac 03-1 Anaverde A................................. 5.350 09/01/30 1,017,940 1,100 Palmdale, CA Spl Tax Cmnty Fac 03-1 Anaverde A................................. 5.400 09/01/35 1,121,461 1,000 Perris, CA Cmnty Fac Dist Spl Tax No 01-2 Ser A...................................... 6.375 09/01/32 1,087,190 2,000 Rancho Cordova Cmnty Fac Dist CA Spl Tax No 2003 1 Sunridge Anatolia................... 5.500 09/01/37 2,034,440 2,000 Riverside, CA Univ Sch Dist Tax Cmnty Fac Dist 15 Impt Area 1........................ 5.550 09/01/30 2,062,480 6,000 San Jose, CA Multi-Family Hsg Rev Helzer Courts Apt Proj Ser A (AMT)................ 6.400 12/01/41 5,823,420 7,100 San Jose, CA Redev Agy Tax Alloc Drivers Ser 1085 (Inverse Fltg) (Acquired 09/12/05, Cost $7,967,620) (MBIA Insd) (a) (d)....... 6.514 08/01/13 7,646,416 2,000 San Marcos, CA Pub Fac Auth Spl Tax Rev Ser A.......................................... 5.650 09/01/36 2,065,760 5,000 Tob Securitization Auth Northrn CA Tob Settlement Rev Asset Bkd Bds Ser A1........ 5.500 06/01/45 5,051,600 1,000 Upland, CA Cmnty Fac Dist 2003 San Antonio Impt 1 A................................... 5.900 09/01/24 1,058,010 1,500 Upland, CA Cmnty Fac Dist 2003 San Antonio Impt 1 A................................... 6.000 09/01/34 1,583,850 1,965 Vallejo, CA Ctf Partn Touro Univ........... 7.250 06/01/16 2,110,548 950 Vallejo, CA Pub Fin Auth Loc Hiddenbrooke Impt Dist Ser A............................ 5.800 09/01/31 972,173 1,000 Woodland, CA Spl Tax Cmnty Fac Dist 1 Spring Lake................................ 6.250 09/01/34 1,090,580 1,800 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/31 1,914,084 3,000 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/39 3,150,300 -------------- 151,131,271 -------------- COLORADO 2.7% 1,060 Beacon Pt Metro Dist Co Ser A.............. 6.125 12/01/25 1,108,665 1,005 Beacon Pt Metro Dist Co Ser A.............. 6.250 12/01/35 1,050,486
See Notes to Financial Statements 13 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- COLORADO (CONTINUED) $ 1,000 Bromley Pk Metro Dist CO No 2 Ser B........ 8.050% 12/01/32 $ 1,078,170 1,000 Castle Oaks Metro Dist CO Ltd Tax.......... 6.000 12/01/25 1,049,630 1,500 Castle Oaks Metro Dist CO Ltd Tax.......... 6.125 12/01/35 1,579,200 795 Colorado Ed & Cultural Fac Charter Sch Frontier Academy........................... 7.250 06/01/20 822,117 2,000 Colorado Hlth Fac Auth Rev Baptist Home Assn Ser A................................. 6.375 08/15/24 1,909,380 2,000 Colorado Hlth Fac Auth Rev Baptist Home Assn Ser B (Variable Rate Coupon).......... 7.250 08/15/27 1,991,560 1,060 Colorado Hlth Fac Auth Rev Christian Living Campus Proj................................ 7.050 01/01/19 1,085,567 3,000 Colorado Hlth Fac Auth Rev Covenant Retirement Cmnty Inc....................... 5.000 12/01/35 2,947,410 2,000 Colorado Intl Ctr Metro Dist No 3.......... 6.500 12/01/35 2,042,820 3,425 Denver, CO Hlth & Hosp Auth Ser A Rfdg..... 6.250 12/01/33 3,754,382 2,500 Elk Vly, CO Pub Impt Fee Ser A............. 7.300 09/01/22 2,681,350 1,150 High Plains Metro Dist CO Ser A............ 6.125 12/01/25 1,210,720 2,250 High Plains Metro Dist CO Ser A............ 6.250 12/01/35 2,377,440 615 Lafayette, CO Indl Dev Rev Rocky Mtn Instr Proj Ser A (d)............................. 6.750 10/01/14 510,924 1,920 Lafayette, CO Indl Dev Rev Rocky Mtn Instr Proj Ser A (AMT)........................... 7.000 10/01/18 1,556,275 4,700 Lake Creek Affordable Hsg Corp Hsg Proj Ser A Rfdg..................................... 6.250 12/01/23 4,843,632 500 Neu Towne, CO Metro Dist................... 7.250 12/01/34 548,605 3,500 Northwest CO Metro Dist No 3 Ltd Tax....... 6.125 12/01/25 3,610,355 1,000 Serenity Ridge, CO Metro Dist No 2......... 7.500 12/01/34 1,114,050 1,672 Skyland Metro Dist CO Gunnison Cnty Rfdg... 6.750 12/01/22 1,725,504 1,000 Southlands Metro Dist No 1 CO.............. 7.000 12/01/24 1,104,020 1,000 Wheatlands Metro Dist No 2 CO Ltd Tax...... 6.000 12/01/25 1,041,960 1,500 Wheatlands Metro Dist No 2 CO Ltd Tax...... 6.125 12/01/35 1,565,430 -------------- 44,309,652 -------------- CONNECTICUT 0.5% 1,500 Connecticut St Dev Auth Indl Afco Cargo Bdlg LLC Proj (AMT)........................ 8.000 04/01/30 1,626,825 2,000 Mohegan Tribe Indians CT Pub Impt Priority Dist (Acquired 09/27/01, Cost $1,955,120) (a)....................... 6.250 01/01/31 2,140,300 3,500 Mohegan Tribe Indians CT Pub Impt Priority Dist (Acquired 11/03/04 to 11/04/04, Cost $3,418,565) (a)....................... 5.250 01/01/33 3,529,645 -------------- 7,296,770 --------------
14 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- DELAWARE 0.2% $ 850 Sussex Cnty, DE Rev Adj First Mtg Cadbury Lewes Ser A................................ 5.900% 01/01/26 $ 863,132 1,000 Sussex Cnty, DE Rev Adj First Mtg Cadbury Lewes Ser A................................ 6.000 01/01/35 1,013,890 1,080 Wilmington, DE Multi-Family Rent Rev Hsg Electra Arms Sr Assoc Proj (AMT)........... 6.250 06/01/28 1,088,640 -------------- 2,965,662 -------------- DISTRICT OF COLUMBIA 0.1% 1,000 District of Columbia Rev Methodist Home Issue...................................... 6.000 01/01/29 1,013,470 85 District of Columbia Ser A-1 (Escrowed to Maturity) (MBIA Insd)...................... 6.500 06/01/10 94,124 -------------- 1,107,594 -------------- FLORIDA 10.0% 1,000 Anthem Pk Cmnty Dev Dist FL Cap Impt Rev... 5.800 05/01/36 1,029,960 1,000 Bellalago Ed Fac Benefits Ser A............ 6.000 05/01/33 1,046,490 1,000 Bellalago Ed Fac Benefits Ser B............ 5.800 05/01/34 1,033,210 4,315 Bloomingdale, FL Cmnty Dev Dist Spl Assmt Rev........................................ 5.875 05/01/36 4,504,946 1,000 Bluewaters Cmnty Dev Dist of FL............ 6.000 05/01/35 1,050,260 2,350 Boca Raton, FL Hsg Auth Mtg Hsg Rev First Lien Banyan Pl Sr Apt Rfdg (Acquired 03/23/06, Cost $2,317,265) (a)............. 5.900 10/01/36 2,309,862 1,855 Boca Raton, Fl Hsg Auth Mtg Hsg Rev First Lien Banyan Pl Sr Apt Rfdg (Acquired 03/23/06, Cost $1,811,556) (a)............. 5.800 10/01/26 1,815,841 2,500 Bonnet Creek Resort Cmnty Dev.............. 7.500 05/01/34 2,756,350 5,000 Brevard Cnty, FL Hlth Fac Auth Hlthcare Fac Rev Rites Pa 1342 (Inverse Fltg) (Acquired 12/08/05, Cost $4,707,600) (a) (d)......... 7.486 04/01/34 5,353,000 795 Caribe Palm Cmnty Dev Dist FL Spl Assmt Ser A.......................................... 5.850 05/01/35 824,057 1,000 City Ctr Cmnty Dev Dist FL Spl Assmt Rev Ser A...................................... 6.125 05/01/36 1,006,290 2,935 Escambia Cnty, FL Rev ICF/MR Pensacola Care Dev Ctr.................................... 10.250 07/01/11 2,961,708 1,245 Escambia Cnty, FL Rev ICF/MR Pensacola Care Dev Ctr Ser A.............................. 10.250 07/01/11 1,256,329 1,285 Fishhawk Cmnty Dev Dist of FL Spl Assmt Rev (Prerefunded @ 05/01/06)................... 7.625 05/01/18 1,314,516 3,645 Florida Hsg Fin Corp Rev Hsg Beacon Hill Apt Ser C (AMT)............................ 6.610 07/01/38 3,771,700 7,090 Florida Hsg Fin Corp Rev Hsg Cypress Trace Apt Ser G (AMT)............................ 6.600 07/01/38 7,293,412 4,795 Florida Hsg Fin Corp Rev Hsg Westchase Apt Ser B (AMT)................................ 6.610 07/01/38 4,925,280
See Notes to Financial Statements 15 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 2,750 Greater Orlando Aviation Auth Orlando, FL Arpt Fac Rev Spl Purp Jetblue Awy Corp (AMT)...................................... 6.375% 11/15/26 $ 2,775,327 2,800 Greater Orlando Aviation Auth Orlando, FL Arpt Fac Rev Spl Purp Jetblue Awy Corp (AMT)...................................... 6.500 11/15/36 2,821,448 3,505 Hammock Bay Cmnty Dev Dist FL Spl Assmt Rev Ser A...................................... 6.125 05/01/35 3,660,201 1,480 Harbour Isles Cmnty Dev Dist of FL......... 6.125 05/01/35 1,562,140 300 Heritage Harbor Cmnty Dev Dist FL Rev Rec........................................ 7.750 05/01/23 297,867 775 Heritage Harbor Cmnty Dev Dist FL Rev Spl Assmt Ser A................................ 6.700 05/01/19 791,081 1,435 Highlands Cnty, FL Hlth Fac Hosp Adventist Hlth Sys................................... 5.250 11/15/28 1,461,705 2,000 Highlands, FL Cmnty Dev Dist Spl Assmt..... 5.550 05/01/36 2,027,660 3,500 Hillsborough Cnty, FL Hsg Fin Hsg Clipper Cove Apt Proj Ser A (AMT).................. 7.375 07/01/40 3,760,155 2,500 Hillsborough Cnty, FL Indl Dev Auth Hosp Rev Tampa Gen Hosp Proj Ser B.............. 5.250 10/01/34 2,586,225 990 Islands at Doral III Cmnty 2004 Ser A...... 5.900 05/01/35 1,023,175 1,000 Islands at Doral NE Cmnty Dev.............. 6.250 05/01/34 1,065,880 6,410 Jea, FL Wtr & Swr Sys Rev Drivers Ser 805 (Inverse Fltg) (Acquired 03/22/05, Cost $6,268,702) (MBIA Insd) (a)................ 6.004 10/01/12 6,440,255 1,530 Kendall Breeze West Cmnty Dev Dist FL Spl Assmt...................................... 5.875 05/01/34 1,598,559 1,975 Keys Cove Cmnty Dev Dist FL Assmt Rev...... 5.875 05/01/35 2,065,080 2,940 Keys Cove Cmnty Dev Dist II FL............. 5.500 05/01/36 2,984,982 2,000 Lee Cnty, FL Indl Dev Auth Hlthcare Fac Rev Cypress Cove Hlthpk Ser A.................. 6.750 10/01/32 2,120,460 3,500 Leon Cnty, FL Ed Fac Auth Rev Southgate Residence Hall Ser A Rfdg.................. 6.750 09/01/28 3,612,945 1,270 Lexington Cmnty Dev Dist FL................ 6.125 05/01/34 1,331,163 75 Marshall Creek Cmnty Dev FL Spl Assmt Ser B.......................................... 6.750 05/01/07 75,979 2,470 Meadow Woods Cmnty Dev Dist FL Ser A....... 6.050 05/01/35 2,552,597 1,000 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med Ctr FL Proj................................ 5.375 11/15/28 1,002,570 2,500 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med Ctr Rfdg (Acquired 04/26/04, Cost $2,411,600) (a)............................ 6.750 11/15/29 2,806,025 3,000 Midtown Miami, FL Cmnty Dev Dist Ser A..... 6.000 05/01/24 3,256,500 1,120 Miromar Lakes Cmnty Dev Dist Ser B Rfdg.... 7.250 05/01/12 1,210,619 2,500 New Port Tampa Bay Cmnty Dev Dist FL Spl Assmt Ser A................................ 5.875 05/01/38 2,529,800 910 Northern Palm Beach Cnty Dist FL Impt Wtr Ctl & Impt Unit Dev No 16 Rfdg............. 7.500 08/01/24 981,717 1,750 Oak Creek Cmnty Dev Dist FL Spl Assmt...... 5.800 05/01/35 1,818,267
16 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 2,050 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg (Prerefunded @ 07/01/06).................................. 8.625% 07/01/20 $ 2,136,489 2,250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg (Prerefunded @ 07/01/06)................... 8.750 07/01/26 2,345,602 1,560 Orange Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys (Prerefunded @ 11/15/10) (d)............... 5.875 11/15/11 1,713,598 1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys (Prerefunded @ 11/15/10).................................. 6.375 11/15/20 1,119,050 2,000 Orange Cnty, FL Hlth Fac Auth Rev Westminster Cmnty Care..................... 6.600 04/01/24 2,065,000 990 Overoaks, FL Cmnty Dev Dist CA Ser A....... 6.125 05/01/35 1,044,945 985 Parklands Lee Cmnty Dev Dist FL Spl Assmt Ser A...................................... 5.800 05/01/35 1,014,008 1,000 Pine Is Cmnty Dev Dist FL Spl Assmt........ 5.750 05/01/35 1,027,720 3,000 Pinellas Cnty, FL Hlth Fac Auth Oaks of Clearwtr Proj.............................. 6.250 06/01/34 3,154,830 1,000 Reunion East Cmnty Dev Dist................ 5.800 05/01/36 1,034,070 2,000 Reunion West Cmnty Dev Dist................ 6.250 05/01/36 2,113,900 5,000 River Hall Cmnty Dev Dist FL Cap Impt Rev........................................ 5.450 05/01/36 5,043,650 980 Saddlebrook, FL Cmnty Ser A................ 6.900 05/01/33 1,056,303 500 Saint John's Cnty, FL Indl Dev Auth Hlthcare Glenmoor Saint John's Proj Ser A.......................................... 8.000 01/01/17 536,540 4,500 Saint John's Cnty, FL Indl Dev Auth Hlthcare Glenmoor Saint John's Proj Ser A.......................................... 8.000 01/01/30 4,828,860 2,000 Saint John's Cnty, FL Indl Dev Auth Hlthcare Rev Bayview Proj Ser A............ 7.100 10/01/26 2,018,600 1,995 Silver Palms Cmnty Dev Dist (d)............ 5.900 05/01/34 2,081,044 1,300 South Dade Venture Cmnty Dev............... 6.125 05/01/34 1,379,833 1,480 South Vlg Cmnty Dev Dist FL Cap Impt Rev Ser A...................................... 5.700 05/01/35 1,515,831 115 Stoneybrook West Cmnty Dev Dist FL Spl Assmt Rev Ser B............................ 6.450 05/01/10 115,728 4,000 Tisons Landing Cmnty Dev Dist FL Spl Assmt Ser A...................................... 5.625 05/01/37 4,045,120 4,000 Tolomato Cmnty Dev Dist FL Spl Assmt....... 5.400 05/01/37 4,035,520 1,500 Town Ctr at Palm Coast Cmnty Dev Dist FL Cap Impt Rev............................... 6.000 05/01/36 1,551,795 1,480 Turnbull Creek Cmnty Dev Dist FL Spl Assmt...................................... 5.800 05/01/35 1,520,730 1,652 University Square Cmnty Dev Dist FL Cap Impt Rev (Acquired 10/07/99 to 09/07/00, Cost $1,650,391) (a)....................... 6.750 05/01/20 1,783,384 2,660 Verano Ctr Cmnty Dev Dist FL Cmnty Infrastructure Proj Ser A (c).............. 5.375 05/01/37 2,664,602
See Notes to Financial Statements 17 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 2,000 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj Rfdg (Prerefunded @ 11/01/06)......... 7.625% 11/01/26 $ 2,085,600 1,000 World Comm Cmnty Dev Dist Ser A1........... 6.250 05/01/22 1,046,090 1,695 World Comm Cmnty Dev Dist Ser A2........... 6.125 05/01/35 1,769,105 -------------- 162,321,140 -------------- GEORGIA 1.4% 2,000 Atlanta, GA Tax Alloc Atlantic Sta Proj.... 7.750 12/01/14 2,224,840 1,235 Atlanta, GA Tax Alloc Princeton Lakes Proj (Acquired 03/10/06, Cost $1,235,000) (a)... 5.500 01/01/31 1,248,350 2,325 Atlanta, GA Urban Residential Fin Auth Multi-Family Rev John Eagan Proj Ser A (AMT)...................................... 6.750 07/01/30 2,134,768 2,750 De Kalb Cnty, GA Residential Care Fac Kings Brdg Ser A................................. 8.250 07/01/26 2,821,142 1,000 Effingham Cnty, GA Dev Auth Solfort James Proj (AMT)................................. 5.625 07/01/18 998,060 1,800 Fulton Cnty, GA Residential Care Canterbury Court Proj Ser A........................... 6.000 02/15/22 1,829,682 650 Fulton Cnty, GA Residential Care Canterbury Court Proj Ser A........................... 6.125 02/15/34 667,816 3,500 Fulton Cnty, GA Residential Care Sr Lien RHA Asstd Living Ser A..................... 7.000 07/01/29 3,624,180 4,000 Milledgeville Baldwin Cnty, GA College & St Univ Fndtn................................. 5.625 09/01/30 4,197,640 1,000 Private Colleges & Univ Auth GA Mercer Hsg Corp Proj Ser A............................ 6.000 06/01/21 1,044,610 2,930 Renaissance on Peachtree Unit Invt Tr Ctf GA Custody Ctf (Variable Rate Coupon)...... 12.178 10/01/25 2,395,744 -------------- 23,186,832 -------------- HAWAII 0.5% 2,500 Hawaii St Dept Budget & Fin Spl Purp Rev Kahala Nui Proj Ser A...................... 8.000 11/15/33 2,895,625 1,820 Hawaii St Dept Trans Spl Fac Rev Continental Airl Inc (AMT)................. 5.625 11/15/27 1,564,745 2,825 Kuakini, HI Hlth Sys Spl Ser A............. 6.375 07/01/32 3,044,389 -------------- 7,504,759 -------------- IDAHO 0.2% 1,000 Idaho Hlth Fac Auth Rev Vly Vista Care Ser A Rfdg..................................... 7.875 11/15/29 1,003,940 1,000 Madison Cnty, ID Hosp Rev Ctf (c).......... 5.250 09/01/30 1,017,220 1,300 Madison Cnty, ID Hosp Rev Ctf (c).......... 5.250 09/01/37 1,317,121 -------------- 3,338,281 -------------- ILLINOIS 7.1% 2,500 Bolingbrook, IL Cap Apprec Ser B (MBIA Insd)................................ * 01/01/29 744,550 4,000 Bolingbrook, IL Sales Tax Rev Bolingbrook (e)........................................ 0.000/6.250 01/01/24 3,587,360
18 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 1,990 Bolingbrook, IL Spl Svc Area No 01-1....... 7.375% 07/01/31 $ 2,165,478 1,665 Bolingbrook, IL Spl Svc Area No 1 Spl Tax Augusta Vlg Proj Ser 2004.................. 6.250 03/01/32 1,713,302 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 1,595,700 2,000 Bolingbrook, IL Spl Svc Area No 1 Spl Tax Forest City Tax Proj (e)................... 0.000/5.900 03/01/27 1,838,480 1,894 Bolingbrook, IL Spl Svc Area No 3 Lakewood Ridge Proj................................. 7.050 03/01/31 2,027,963 947 Cary, IL Spl Tax Svc Area No 1 Cambridge Ser A...................................... 7.625 03/01/30 1,055,905 7,750 Chicago, IL O'Hare Intl Arpt Rev RR II R 239-1 (AMT) (Inverse Fltg) (Acquired 08/18/03, Cost $8,490,358) (FSA Insd) (a) (d)........................................ 8.180 01/01/19 9,179,565 4,950 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.500 01/01/38 5,279,769 50 Chicago, IL Proj Ser A Rfdg (Prerefunded @ 01/01/11) (MBIA Insd)...................... 5.500 01/01/38 54,293 4,000 Chicago, IL Spl Assmt Lakeshore East Proj....................................... 6.625 12/01/22 4,330,520 760 Chicago, IL Tax Increment Alloc Read Dunning Ser B (ACA Insd)................... 7.250 01/01/14 791,631 3,000 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A (ACA Insd)................ 6.500 12/01/06 3,054,990 1,925 Chicago, IL Tax Increment Alloc Sub Cent Loop Redev Ser A (ACA Insd)................ 6.500 12/01/08 2,050,568 1,000 Clay Cnty, IL Hosp Rev (Prerefunded @ 12/01/08).................................. 5.900 12/01/28 1,074,650 1,127 Gilberts, IL Spl Svc Area No 9 Spl Tax Big Timber Proj (Escrowed to Maturity) (d)..... 7.375 03/01/11 1,238,787 1,245 Gilberts, IL Spl Svc Area No 9 Spl Tax Big Timber Proj (Prerefunded @ 03/01/11)....... 7.750 03/01/27 1,475,512 1,500 Godfrey, IL Rev Utd Methodist Vlg Ser A.... 5.875 11/15/29 1,227,405 2,700 Hoopeston, IL Hosp Cap Impt Rev Hoopeston Cmnty Mem Hosp Rfdg........................ 6.550 11/15/29 2,542,536 1,660 Huntley, IL Increment Alloc Rev Huntley Redev Proj Ser A........................... 8.500 12/01/15 1,706,380 187 Huntley, IL Spl Svc Area No 10 Spl Tax Ser A (d)...................................... 6.250 03/01/09 194,573 2,621 Huntley, IL Spl Svc Area No 10 Spl Tax Ser A.......................................... 6.500 03/01/29 2,791,994 9,000 Illinois Fin Auth Rev Clare at Wtr Tower Proj Ser A................................. 6.125 05/15/38 9,105,480 1,405 Illinois Fin Auth Rev Cmnty Fac Clinic Altgeld Proj............................... 8.000 11/15/16 1,283,144 500 Illinois Fin Auth Rev Fairview Oblig Grp Ser A Rfdg................................. 6.000 08/15/20 508,420
See Notes to Financial Statements 19 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 500 Illinois Fin Auth Rev Fairview Oblig Grp Ser A Rfdg................................. 6.125% 08/15/27 $ 506,550 1,000 Illinois Fin Auth Rev Friendship Vlg Schaumburg Ser A........................... 5.375 02/15/25 1,007,300 2,000 Illinois Fin Auth Rev Friendship Vlg Schaumburg Ser A........................... 5.625 02/15/37 2,029,140 3,000 Illinois Fin Auth Rev Landing at Plymouth Pl Proj A.................................. 6.000 05/15/37 3,017,370 3,000 Illinois Fin Auth Rev Northwestn Mem Hosp Ser A...................................... 5.500 08/15/43 3,183,330 1,000 Illinois Hlth Fac Auth Rev Ctr Baptist Home Proj....................................... 7.125 11/15/29 1,056,970 2,500 Illinois Hlth Fac Auth Rev Decatur Mem Hosp....................................... 5.750 10/01/24 2,619,150 3,000 Illinois Hlth Fac Auth Rev Fairview Oblig Grp Ser A Rfdg (Prerefunded @ 08/15/06).... 7.400 08/15/23 3,097,590 650 Illinois Hlth Fac Auth Rev Loyola Univ Hlth Sys Ser A.................................. 6.000 07/01/21 687,459 1,200 Illinois Hlth Fac Auth Rev Lutheran Sr Ministries Oblig Ser A..................... 7.375 08/15/31 1,305,348 1,500 Illinois Hlth Fac Auth Rev Peace Mem Ministries Proj (Prerefunded @ 08/15/06)... 7.500 08/15/26 1,549,350 1,175 Illinois Hlth Fac Auth Rev Proctor Cmnty Hosp Proj.................................. 7.500 01/01/11 1,176,128 250 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.200 08/15/23 253,805 1,125 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.400 08/15/33 1,142,077 300 Illinois Hlth Fac Auth Rev Silver Cross Rfdg (Prerefunded @ 08/15/09).............. 5.500 08/15/19 318,972 400 Illinois Hlth Fac Auth Rev Silver Cross.... 5.500 08/15/19 414,216 2,375 Lake Cnty, IL Fst Presv Dist Ld Acquisition & Dev...................................... 5.750 12/15/16 2,579,820 675 Lake Cnty, IL Fst Presv Dist Ld Acquisition & Dev...................................... 5.750 12/15/17 731,065 80 Lake, Cook, Kane & McHenry Cntys, IL Cmnty Unit Sch Dist No 22 (FGIC Insd)............ 5.750 12/01/19 86,386 2,200 Manhattan, IL No 04 -1 Brookstone Springs Proj....................................... 6.100 03/01/35 2,253,922 1,000 Minooka, IL Spl Assmt Impt Lakewood Trls Unit 2 Proj................................ 6.375 03/01/34 1,049,380 1,195 Montgomery, IL Spl Assmt Impt Lakewood Creek Proj................................. 7.750 03/01/30 1,315,994 1,800 Peoria, IL Spl Tax Weaverridge Spl Svc Area....................................... 8.050 02/01/17 1,893,762 3,000 Pingree Grove, IL Spl Svc Area No 2 Spl Tax Ser 05-2 Cambridge Lakes Proj.............. 6.000 03/01/35 3,056,370 2,000 Plano, IL Spl Svc Area No 1 Lakewood Springs Proj Ser A......................... 6.200 03/01/34 2,067,960 2,095 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000 06/01/17 2,760,477
20 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 940 Sterling, IL Rev Hoosier Care Proj Ser A... 7.125% 06/01/34 $ 904,083 3,135 Wheeling, IL Tax Increment Rev N Milwaukee/Lake Cook Tif Proj............... 6.000 01/01/25 3,060,606 5,650 Yorkville, IL Utd City Spl Svc Area Spl Tax No 2004 107 Raintree Vlg II Proj........... 6.250 03/01/35 5,798,030 2,000 Yorkville, IL Utd City Spl Svc Area Spl Tax No 4 104 Mpi Grade Resv Proj............... 6.375 03/01/34 2,083,380 -------------- 115,624,945 -------------- INDIANA 0.9% 825 Crawfordsville, IN Redev Cmnty Redev Dist Tax Increment Rev (Acquired 10/15/97, Cost $825,000) (a) (d).......................... 7.000 02/01/12 834,883 1,885 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj Ser A................................. 7.125 06/01/34 1,812,974 6,500 Indiana Hlth Fac Hosp Rev Cmnty Fndtn Northwest IN Ser A......................... 6.000 03/01/34 6,860,880 2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt (AMT)...................................... 6.375 11/01/29 2,126,240 1,810 Portage, IN Spl Impt Dist Rev Marina Shores Proj....................................... 6.375 03/01/35 1,819,050 230 Saint Joseph Cnty IN Econ Dev Rev Holy Cross Vlg Notre Dame Proj A................ 6.000 05/15/26 240,819 265 Saint Joseph Cnty IN Econ Dev Rev Holy Cross Vlg Notre Dame Proj A................ 5.700 05/15/28 267,661 470 Saint Joseph Cnty IN Econ Dev Rev Holy Cross Vlg Notre Dame Proj A................ 6.000 05/15/38 487,653 -------------- 14,450,160 -------------- IOWA 0.9% 1,000 Bremer Cnty, IA Retirement Fac Rev Bartels Lutheran Ser A............................. 5.375 11/15/27 1,004,780 2,000 Estherville, IA Hosp Rev Avera Holy Family Proj....................................... 6.250 07/01/26 2,124,480 375 Evansdale, IA Hlthcare Westn Home Proj..... 6.000 11/01/26 382,987 3,400 Evansdale, IA Hlthcare Westn Home Proj Ser A (d)...................................... 6.000 11/01/26 3,455,488 1,950 Iowa Fin Auth Hlthcare Fac Care Initiatives Proj Rfdg.................................. 9.250 07/01/25 2,333,175 500 Iowa Fin Auth Retirement Cmnty Friendship Haven Proj Ser A........................... 5.750 11/15/19 503,610 500 Iowa Fin Auth Retirement Cmnty Friendship Haven Proj Ser A........................... 6.000 11/15/24 506,680 800 Iowa Fin Auth Retirement Cmnty Friendship Haven Proj Ser A........................... 6.125 11/15/32 809,880
See Notes to Financial Statements 21 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- IOWA (CONTINUED) $ 1,000 Polk Cnty, IA Hlthcare Fac Rev Luther Pk Hth Ctr Inc Proj........................... 6.150% 10/01/36 $ 1,015,710 3,000 Tobacco Settlement Auth IA Tob Settlement Rev Asset Bkd Ser C........................ 5.375 06/01/38 3,014,850 -------------- 15,151,640 -------------- KANSAS 0.4% 910 Lawrence, KS Coml Dev Rev Holiday Inn Sr Ser A Rfdg (b)............................. 8.000 07/01/16 486,331 1,000 Lenexa, KS Hlthcare Fac Rev Lakeview Vlg Inc Ser B.................................. 6.250 05/15/26 1,018,450 915 Manhattan, KS Coml Dev Rev Holiday Inn Sr Ser A Rfdg (b)............................. 8.000 07/01/16 497,623 1,500 Olathe, KS Sr Living Fac Rev Aberdeen Vlg Inc Ser A Rfdg............................. 5.600 05/15/28 1,507,500 1,000 Olathe, KS Sr Living Fac Rev Catholic Care Campus Inc. Ser A.......................... 6.000 11/15/26 1,040,560 1,000 Olathe, KS Sr Living Fac Rev Catholic Care Campus Inc. Ser A.......................... 6.000 11/15/38 1,030,010 1,500 Overland Pk, KS Dev Corp Rev First Tier Overland Park Ser A........................ 7.375 01/01/32 1,647,015 -------------- 7,227,489 -------------- LOUISIANA 0.8% 1,975 Louisiana Hsg Fin Agy Rev Azalea Estates Ser A Rfdg (AMT) (GNMA Collateralized)..... 5.375 10/20/39 2,038,121 4,100 Louisiana Loc Govt Environment Fac Cmnty Dev Auth Rev Hlthcare Saint James Place Ser A Rfdg..................................... 7.000 11/01/25 4,180,975 1,800 Louisiana Loc Govt Environment Fac Cmnty Dev Auth Rev Hlthcare Saint James Place Ser A Rfdg..................................... 7.000 11/01/29 1,831,356 1,500 Louisiana Pub Fac Auth Rev Progressive Hlthcare................................... 6.375 10/01/20 1,481,175 1,000 Louisiana Pub Fac Auth Rev Progressive Hlthcare................................... 6.375 10/01/28 950,280 3,054 Louisiana St Univ & Agric & Mechanical College Univ Rev Master Agreement (Acquired 11/30/98, Cost $3,058,911) (a)............. 5.750 10/30/18 2,892,756 -------------- 13,374,663 -------------- MARYLAND 1.4% 2,000 Annapolis, MD Spl Oblig Pk Pl Proj Ser A... 5.350 07/01/34 2,026,060 1,000 Baltimore Cnty, MD Mtg Rev Shelter Elder Care Ser A................................. 7.250 11/01/29 1,036,460 4,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty Dev Auth Ser A (d)......................... 5.950 07/01/30 4,144,320
22 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (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 $ 1,038,440 425 Maryland St Econ Dev Corp Air Cargo Rev Afco Cargo BWI II LLC Proj (AMT) (d)....... 6.250 07/01/07 426,645 1,200 Maryland St Econ Dev Corp MD Golf Course Sys (Prerefunded @ 06/01/11)............... 8.250 06/01/28 1,425,108 1,540 Maryland St Hlth & Higher Ed Calvert Hlth Sys................................... 5.500 07/01/36 1,622,790 1,000 Maryland St Hlth & Higher Ed Medstar Hlth Rfdg....................................... 5.500 08/15/33 1,043,880 3,000 Montgomery Cnty, MD Econ Dev Editorial Proj In Ed Ser A (Acquired 09/28/98, Cost $3,000,000) (a)............................ 6.400 09/01/28 2,776,620 1,652 Prince Georges Cnty, MD Rev................ 8.000 04/01/16 1,652,033 3,000 Prince Georges Cnty, MD Spl Oblig Spl Assmt Woodview Ser A............................. 8.000 07/01/26 3,138,060 1,000 Westminster, MD Econ Dev Carroll Lutheran Vlg Ser A.................................. 6.000 05/01/24 1,043,150 1,500 Westminster, MD Econ Dev Carroll Lutheran Vlg Ser A.................................. 6.250 05/01/34 1,574,835 -------------- 22,948,401 -------------- MASSACHUSETTS 2.6% 1,000 Massachusetts St Dev Fin Agy Briarwood Ser B (Prerefunded @ 12/01/10)................. 8.000 12/01/22 1,181,430 250 Massachusetts St Dev Fin Agy Rev Evergreen Ctr Inc.................................... 5.000 01/01/24 241,002 500 Massachusetts St Dev Fin Agy Rev Evergreen Ctr Inc.................................... 5.500 01/01/35 501,675 770 Massachusetts St Dev Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 07/27/00, Cost $768,600) (Prerefunded @ 06/01/08) (a)..... 7.750 06/01/18 843,512 1,890 Massachusetts St Dev Fin Agy Rev Hillcrest Ed Ctr Inc................................. 6.375 07/01/29 1,906,915 2,935 Massachusetts St Dev Fin Agy Rev Hlthcare Fac Alliance Ser A......................... 7.100 07/01/32 3,005,968 1,000 Massachusetts St Dev Fin Agy Rev MCHSP Human Svc Providers Ser A (Prerefunded @ 07/01/10).................................. 8.000 07/01/20 1,163,480 3,650 Massachusetts St Dev Fin Agy Rev New England Ctr For Children................... 6.000 11/01/19 3,744,426 10,315 Massachusetts St Dev Fin Agy Rev Rites PA 1316 (Inverse Fltg) (Acquired 07/20/05, Cost $11,406,224) (AMBAC Insd) (a) (d)..... 6.088 10/01/39 11,000,535 3,100 Massachusetts St Hlth & Ed Civic Invt Ser B.......................................... 9.150 12/15/23 3,738,538 933 Massachusetts St Hlth & Ed Nichols College Issue Ser C................................ 6.000 10/01/17 986,806
See Notes to Financial Statements 23 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $ 1,000 Massachusetts St Hlth & Ed Northrn Berkshire Hlth Ser B....................... 6.250% 07/01/24 $ 1,055,550 1,865 Massachusetts St Indl Fin Agy Assisted Living Fac Rev Marina Bay LLC Proj (AMT) (Prerefunded @ 12/01/07)................... 7.500 12/01/27 1,984,211 980 Massachusetts St Indl Fin Agy Assisted Living Fac Rev Newton Grp Pptys LLC Proj (AMT) (Prerefunded @ 09/01/07)............. 8.000 09/01/27 1,054,676 560 Massachusetts St Indl Fin Agy Rev First Mtg GF/Pilgrim Inc Proj........................ 6.500 10/01/15 542,690 2,000 Massachusetts St Indl Fin Agy Rev First Mtg GF/Pilgrim Inc Proj........................ 6.750 10/01/28 1,879,340 1,975 Massachusetts St Indl Fin Agy Rev First Mtg Reeds Landing Proj (e)..................... 7.350/7.450 10/01/28 1,908,443 2,130 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/98, Cost $2,130,000) (Prerefunded @ 06/01/08) (a)............................ 6.375 06/01/18 2,273,626 370 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Acquired 06/24/98, Cost $370,000) (Escrowed to Maturity) (a)....... 6.200 06/01/08 386,842 3,400 Massachusetts St Indl Fin Agy Rev Swr Fac Res Ctl Composting (AMT) (Acquired 08/10/89, Cost $3,400,00) (a).............. 9.250 06/01/10 3,410,744 -------------- 42,810,409 -------------- MICHIGAN 2.5% 2,500 Chelsea, MI Econ Dev Corp Rev Utd Methodist Retirement Rfdg............................ 5.400 11/15/27 2,469,375 850 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $850,000) (a).............................. 6.850 05/01/21 871,080 1,000 Gaylord, MI Hosp Fin Auth Ltd Oblig Rev Otsego Mem Hosp Rfdg....................... 6.500 01/01/31 1,033,530 1,700 Hillsdale, MI Hosp Fin Hillsdale Cmnty Hlth Ctr............................. 5.000 05/15/13 1,682,660 4,000 Kent Hosp Fin Auth MI Rev Metro Hosp Proj Ser A...................................... 6.250 07/01/40 4,348,080 2,390 Meridian, MI Econ Dev Corp Ltd Oblig Rev First Mtg Burcham Hills Ser A Rfdg......... 7.500 07/01/13 2,444,827 3,430 Meridian, MI Econ Dev Corp Ltd Oblig Rev First Mtg Burcham Hills Ser A Rfdg......... 7.750 07/01/19 3,509,679 3,045 Michigan St Hosp Fin Auth Rev Hosp Pontiac Osteopathic Ser A Rfdg..................... 6.000 02/01/14 3,045,365 1,500 Michigan St Hosp Fin Auth Rev Hosp Pontiac Osteopathic Ser A Rfdg..................... 6.000 02/01/24 1,500,345
24 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MICHIGAN (CONTINUED) $ 2,000 Michigan St Hosp Fin Auth Rev Presbyterian Vlg Rfdg................................... 5.500% 11/15/35 $ 2,070,340 11,084 Michigan St Strategic Fd Ltd Oblig Rev Great Lakes Pulp & Fiber Proj (AMT) (b) (f)........................................ 8.000 12/01/27 1,552,361 10,325 Wayne Cnty, MI Arpt Auth Rev Rols RR II R 352 (AMT) (Inverse Fltg) (Acquired 04/05/05, Cost $11,112,797) (MBIA Insd) (a) (d)........................................ 7.173 12/01/24 11,419,347 3,900 Wenonah Pk Ppty Inc Bay City Hotel Rev Bd......................................... 7.500 04/01/33 3,716,076 -------------- 39,663,065 -------------- MINNESOTA 3.1% 2,000 Aitkin, MN Hlth Fac Rev Riverwood Hlthcare Ctr Proj................................... 7.750 02/01/31 2,183,620 1,000 Cambridge, MN Hsg & Hlthcare Fac Rev Grandview West Proj Ser B.................. 6.000 10/01/33 1,000,820 2,000 Carlton, MN Hlth & Hsg Fac Inter Faith Social Svc Inc Proj........................ 7.500 04/01/19 2,142,620 2,000 Carlton, MN Hlth & Hsg Fac Inter Faith Social Svc Inc Proj........................ 7.750 04/01/29 2,150,720 2,250 Cuyuna Range Hosp Dist MN Hlth Fac Gross Rev........................................ 5.500 06/01/35 2,275,650 900 Duluth, MN Econ Dev Auth Hlthcare Fac Rev Saint Lukes Hosp........................... 6.000 06/15/12 918,657 1,500 Duluth, MN Econ Dev Auth Hlthcare Fac Rev Saint Lukes Hosp........................... 7.250 06/15/32 1,610,025 2,000 Glencoe, MN Hlthcare Fac Rev (Prerefunded @ 04/01/11)................... 7.500 04/01/31 2,317,500 1,400 Minneapolis, MN Student Hsg Rev Riverton Cmnty Hsg Proj Ser A....................... 5.600 08/01/26 1,386,980 3,100 Minneapolis, MN Student Hsg Rev Riverton Cmnty Hsg Proj Ser A....................... 5.700 08/01/40 3,048,788 1,000 Minneapolis, MN Tax Increment Rev Ivy Tower Proj....................................... 5.700 02/01/29 1,006,120 900 Minnesota Agric & Econ Dev Brd Rev Hlthcare Benedictine Proj Ser A..................... 5.500 08/01/23 905,265 875 Minnesota Agric & Econ Dev Brd Rev Hlthcare Benedictine Proj Ser A..................... 5.750 02/01/30 876,636 2,500 Northwest MN Multi-Cnty Pooled Hsg Pgm A Rfdg....................................... 6.250 07/01/40 2,502,300 1,500 Oakdale, MN Rev Sr Hsg Oak Meadows Proj Rfdg....................................... 6.250 04/01/34 1,565,760 1,425 Ramsey, MN Lease Rev Pact Charter Sch Proj Ser A...................................... 6.750 12/01/33 1,449,439 1,500 Saint Cloud, MN Hsg & Redev Auth Sterling Heights Apt Proj (AMT)..................... 7.550 04/01/39 1,586,055 1,000 Saint Paul, MN Hsg & Redev Auth Higher Ground Academy Ser A Rfdg.................. 6.625 12/01/23 1,021,760
See Notes to Financial Statements 25 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MINNESOTA (CONTINUED) $ 5,000 Saint Paul, MN Hsg & Redev Auth Hosp Rev Hltheast Proj.............................. 6.000% 11/15/35 $ 5,368,400 2,185 Saint Paul, MN Hsg & Redev Auth Lease Rev Hope Cmnty Academy Proj A.................. 6.250 12/01/33 2,195,379 2,295 Saint Paul, MN Hsg & Redev Auth LSE Rev Rfdg....................................... 6.750 01/01/35 2,116,747 1,000 Saint Paul, MN Hsg & Redev Cmnty of Peace Academy Proj Ser A......................... 7.875 12/01/30 1,034,830 2,250 Saint Paul, MN Port Auth Hotel Fac Rev Radisson Kellogg Proj Ser 2 Rfdg (Prerefunded @ 08/01/08)................... 7.375 08/01/29 2,489,378 1,250 Saint Paul, MN Port Auth Lease Rev Hltheast Midway Campus 03 Ser A..................... 5.875 05/01/30 1,273,250 700 Saint Paul, MN Port Auth Lease Rev Hltheast Midway Campus 03 Ser B..................... 6.000 05/01/30 714,189 1,000 Shakopee, MN Hlthcare Saint Francis Regl Med Ctr.................................... 5.250 09/01/34 1,026,770 1,000 Vadnais Heights, MN Lease Rev Agric & Food Sciences Ser A............................. 6.375 12/01/24 1,000,650 1,000 Vadnais Heights, MN Lease Rev Agric & Food Sciences Ser A............................. 6.600 12/01/34 997,960 1,450 Winona, MN Hlthcare Winona Hlth Ser A...... 6.000 07/01/34 1,537,160 -------------- 49,703,428 -------------- MISSISSIPPI 0.0% 615 Mississippi Bus Fin Corp (AMT)............. 7.250 07/01/34 633,739 -------------- MISSOURI 4.0% 1,500 Carthage, MO Hosp Rev...................... 5.875 04/01/30 1,507,320 8,500 Carthage, MO Hosp Rev...................... 6.000 04/01/38 8,522,185 1,250 Cole Cnty, MO Indl Dev Auth Sr Living Fac Rev Lutheran Svc Heisinger Proj............ 5.500 02/01/35 1,294,100 910 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg........................... 6.125 10/01/21 930,521 960 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg........................... 7.000 10/01/21 1,025,501 1,440 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj Rfdg...................... 5.000 04/01/17 1,408,435 120 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj (Escrowed to Maturity).... 7.250 04/01/07 123,864 3,095 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj (Prerefunded @ 04/01/07).................................. 7.625 04/01/17 3,265,442 209 Ferguson, MO Tax Increment Rev Crossings at Halls Ferry Proj (Prerefunded @ 04/01/07).................................. 7.625 04/01/18 220,510 1,500 Folk Ave South Transn Dist MO Transn Sales Tax Rev Dev MO............................. 5.625 11/01/31 1,502,955
26 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MISSOURI (CONTINUED) $ 3,000 Joplin, MO Indl Dev Auth Hlth Fac Rev Freeman Hlth Sys Proj...................... 5.500% 02/15/29 $ 3,087,660 2,000 Kansas City, MO Indl Dev Auth First Mtg Bishop Spencer Ser A....................... 6.250 01/01/24 2,084,540 1,500 Kansas City, MO Indl Dev Auth First Mtg Bishop Spencer Ser A....................... 6.500 01/01/35 1,573,185 976 Kansas City, MO Indl Dev Auth Multi-Family Hsg Rev Brentwood Manor Apt Proj Ser B (AMT)................................ 7.250 10/15/38 1,029,895 3,000 Kansas City, MO Indl Dev Plaza Lib Proj.... 5.900 03/01/24 2,998,500 1,793 Kansas City, MO Multi-Family Hsg Rev Northwoods Apts Proj Ser A (AMT)........... 6.450 05/01/40 1,867,840 10,820 Missouri St Hlth & Ed Fac Rev Drivers Ser 362 (Inverse Fltg) (Acquired 07/21/03, Cost $12,211,777) (a) (d)....................... 7.003 05/15/11 12,004,465 6,390 Missouri St Hlth & Ed Fac Rev Drivers Ser 847 (Inverse Fltg) (Acquired 04/05/05, Cost $6,971,107) (a) (d)........................ 6.505 11/15/12 6,908,868 2,220 Nevada, MO Hosp Rev Nevada Regional Med Ctr........................................ 6.750 10/01/22 2,367,741 2,750 Saint Joseph, MO Indl Dev Auth Hlthcare Rev Living Cmnty Saint Joseph Proj............. 7.000 08/15/32 2,939,860 500 Saint Joseph, MO Indl Dev Auth Tax Increment Rev Shoppes at North Vlg Proj Ser A.......................................... 5.100 11/01/19 490,145 1,000 Saint Joseph, MO Indl Dev Auth Tax Increment Rev Shoppes at North Vlg Proj Ser A.......................................... 5.500 11/01/27 999,320 4,820 Saline Cnty, MO Indl Dev Auth Hlth Fac Rev (Acquired 01/12/99, Cost $4,727,371) (a)... 6.500 12/01/28 4,979,301 1,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 6.000 06/01/15 1,149,510 -------------- 64,281,663 -------------- NEVADA 0.5% 3,500 Clark Cnty, NV Indl Dev Southwest Gas Corp Proj Ser D1 (AMT) (FGIC Insd).............. 5.250 03/01/38 3,608,675 3,000 Henderson, NV Hlthcare Fac Rev Catholic Hlthcare West Ser A........................ 5.625 07/01/24 3,188,790 1,000 Las Vegas, NV Loc Impt Bds Spl Impt Dist No 607........................................ 6.000 06/01/19 1,032,660 -------------- 7,830,125 -------------- NEW HAMPSHIRE 0.7% 1,500 New Hampshire Higher Ed & Hlth Brewster Academy (Prerefunded @ 06/01/06)........... 6.750 06/01/25 1,536,810 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Havenwood-Heritage Heights................. 7.350 01/01/18 2,043,140 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Havenwood-Heritage Heights................. 7.450 01/01/25 2,043,120
See Notes to Financial Statements 27 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- NEW HAMPSHIRE (CONTINUED) $ 1,690 New Hampshire Hlth & Ed Fac Auth Rev Huntington At Nashua Ser A................. 6.875% 05/01/33 $ 1,770,241 1,500 New Hampshire Hlth & Ed Fac Hlthcare Sys Covenant Hlth.............................. 5.500 07/01/34 1,561,695 1,500 New Hampshire Hlth & Ed Fac Speare Mem Hosp....................................... 5.875 07/01/34 1,546,020 1,000 New Hampshire St Business Fin Auth Rev Alice Peck Day Hlth Sys Ser A.............. 6.875 10/01/19 1,057,710 -------------- 11,558,736 -------------- NEW JERSEY 5.7% 2,240 Camden Cnty, NJ Impt Auth Lease Rev Dockside Refrig (Acquired 01/29/97 to 05/20/97, Cost $2,340,765) (a) (g)......... 8.400 04/01/24 2,163,840 1,000 Middlesex Cnty, NJ Pollutn Ctl Pollutn Ctl Amerada Rfdg............................... 6.050 09/15/34 1,072,720 2,000 New Jersey Econ Dev Auth Cedar Crest Vlg Inc Fac Ser A.............................. 7.000 11/15/16 2,080,820 2,500 New Jersey Econ Dev Auth Econ Dev Rev Utd Methodist Homes Ser A-1.................... 6.000 07/01/18 2,675,600 2,000 New Jersey Econ Dev Auth First Mtg Franciscan Oaks Proj....................... 5.700 10/01/17 2,032,520 1,000 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.000 11/15/15 1,131,780 1,000 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.125 11/15/18 1,073,970 1,440 New Jersey Econ Dev Auth Retirement Cmnty Rev Ser A.................................. 8.125 11/15/23 1,625,918 710 New Jersey Econ Dev Auth Rev First Mtg Lions Gate Proj A.......................... 5.750 01/01/25 725,095 1,230 New Jersey Econ Dev Auth Rev First Mtg Lions Gate Proj A.......................... 5.875 01/01/37 1,260,541 1,000 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06)................... 8.500 11/01/16 1,048,010 1,500 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06)................... 8.625 11/01/25 1,573,050 1,440 New Jersey Econ Dev Auth Rev Kullman Assoc Proj Ser A (AMT)........................... 6.125 06/01/18 1,299,658 2,000 New Jersey Econ Dev Auth Rev Sr Living Fac Esplanade Bear (AMT)....................... 7.000 06/01/39 1,548,360 3,000 New Jersey Econ Dev Auth Rev Sr Mtg Arbor Glen Proj Ser A (Prerefunded @ 05/15/06)... 8.750 05/15/26 3,078,450 5,035 New Jersey Econ Dev Auth Spl Fac Rev Contl Airl Inc Proj (AMT)........................ 6.250 09/15/19 5,030,267
28 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- NEW JERSEY (CONTINUED) $ 9,525 New Jersey Econ Dev Auth Spl Fac Rev Contl Airl Inc Proj (AMT)........................ 6.400% 09/15/23 $ 9,537,573 5,000 New Jersey Econ Dev Auth Spl Fac Rev Contl Airl Inc Proj (AMT)........................ 6.250 09/15/29 4,981,500 16,010 New Jersey Econ Dev Auth Spl Fac Rev Contl Airl Inc Proj (AMT)........................ 7.000 11/15/30 16,320,114 1,500 New Jersey Econ Dev Auth Sr Mtg Arbor Ser A...................................... 6.000 05/15/28 1,538,355 3,500 New Jersey Econ Dev Auth Utd Methodist Homes NJ Oblig............................. 5.750 07/01/29 3,566,220 900 New Jersey Hlthcare Fac Fin Auth Rev Avalon at Hillsborough A (AMT).................... 6.375 07/01/25 907,056 575 New Jersey Hlthcare Fac Fin Auth Rev Avalon at Hillsborough A (AMT).................... 6.625 07/01/35 580,744 3,225 New Jersey Hlthcare Fac Fin Auth Rev Cap Hlth Sys Oblig Grp Ser A................... 5.375 07/01/33 3,312,333 810 New Jersey Hlthcare Fac Fin Auth Rev Raritan Bay Med Ctr Issue Rfdg............. 7.250 07/01/14 835,596 3,000 New Jersey Hlthcare Fac Fin Inst Inc Cherry Hill Proj.................................. 8.000 07/01/27 3,115,080 1,000 New Jersey St Ed Fac Auth Rev Felician College of Lodi Ser D (Acquired 11/07/97, Cost $1,000,000) (a)....................... 7.375 11/01/22 1,047,810 3,535 Tobacco Settlement Fin Corp NJ............. 6.750 06/01/39 3,958,776 5,000 Tobacco Settlement Fin Corp NJ............. 6.250 06/01/43 5,408,100 5,000 Tobacco Settlement Fin Corp NJ Asset Bkd... 6.000 06/01/37 5,247,250 2,000 Tobacco Settlement Fin Corp NJ Asset Bkd... 6.125 06/01/42 2,106,600 -------------- 91,883,706 -------------- NEW MEXICO 0.5% 4,065 Albuquerque, NM Retirement Fac Rev La Vida Llena Proj Ser B Rfdg...................... 6.600 12/15/28 4,198,251 1,505 Cabezon Pub Impt Dist NM Spl Levg Rev...... 6.000 09/01/24 1,541,782 1,005 New Mexico Hsg Auth Region III Sr Brentwood Gardens Apt Ser A (AMT).................... 6.850 12/01/31 1,035,411 750 Ventana West Pub Impt Dist NM.............. 6.875 08/01/33 794,228 -------------- 7,569,672 -------------- NEW YORK 8.1% 965 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van Allen Proj Ser A........................... 6.875 06/01/39 964,875 1,000 Brookhaven, NY Indl Dev Agy Mem Hosp Med Ctr Inc Ser A.............................. 8.125 11/15/20 1,091,630 1,400 Brookhaven, NY Indl Dev Agy Sr Residential Hsg Rev Woodcrest Estates Fac Ser A (AMT)...................................... 6.375 12/01/37 1,430,072 3,415 Dutchess Cnty, NY Indl Dev Agy Saint Francis Hosp Ser A Rfdg.................... 7.500 03/01/29 3,728,839
See Notes to Financial Statements 29 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 8,250 Metropolitan Trans Auth NY Drivers Ser 898 (Inverse Fltg) (Acquired 05/09/05, Cost $8,893,723) (FSA Insd) (a) (d)............. 6.504% 05/15/11 $ 8,863,388 5,000 Metropolitan Trans Auth NY Rev Trans Ser F.......................................... 5.000 11/15/35 5,144,050 1,975 Monroe Cnty, NY Indl Dev Agy Woodland Vlg Proj....................................... 8.000 11/15/15 2,220,453 3,000 New York City Indl Dev Agy JFK Intl Arpt Proj Ser B (AMT)........................... 8.500 08/01/28 3,358,500 15,400 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A...................... 6.500 03/01/35 16,276,260 4,445 New York City Indl Dev Agy Rev Rols RR II R 523CE (Inverse Fltg) (Acquired 03/03/06, Cost $5,310,353) (a) (d)................... 14.469 03/01/15 5,390,007 10,000 New York City Indl Dev Agy Spl Fac Rev Amern Airl JFK Intl Arpt (AMT)............. 7.500 08/01/16 11,003,900 11,750 New York City Indl Dev Agy Spl Fac Rev Amern Airl JFK Intl Arpt (AMT)............. 7.625 08/01/25 12,913,838 5,000 New York City Indl Dev Agy Spl Fac Rev Amern Airl JFK Intl Arpt (AMT)............. 7.750 08/01/31 5,542,050 10,000 New York City Muni Wtr Fin Drivers Ser 786 (Inverse Fltg) (Acquired 03/15/05 to 07/21/05, Cost $10,866,500) (a)............ 7.411 12/15/12 10,661,400 4,800 New York City Ser A........................ 7.000 08/01/07 4,922,448 200 New York City Ser A (Prerefunded @ 08/01/06).................................. 7.000 08/01/07 205,294 5,000 New York City Transitional Drivers Ser 386 (Inverse Fltg) (Acquired 02/02/04, Cost $5,458,300) (a) (d)........................ 6.504 02/01/12 5,464,150 1,360 New York St Dorm Auth Rev NY Methodist Hosp....................................... 5.250 07/01/24 1,430,026 2,000 New York St Dorm Auth Rev NY Methodist Hosp....................................... 5.250 07/01/33 2,088,260 2,500 New York St Energy Resh & Dev Auth Gas Fac Rev (Inverse Fltg)......................... 9.025 04/01/20 2,845,925 1,955 Saratoga Cnty, NY Indl Dev Agy Sr Hsg Rev Highpointe at Malta Proj Ser A............. 6.875 06/01/39 1,964,482 1,000 Suffolk Cnty, NY Gurwin Jewish Phase II.... 6.700 05/01/39 1,071,950 1,000 Suffolk Cnty, NY Indl Dev Agy Continuing Care Retirement Cmnty Rev.................. 7.250 11/01/28 1,079,330 2,975 Suffolk Cnty, NY Indl Dev Agy Eastn Long Is Hosp Assoc Ser A........................... 7.750 01/01/22 3,174,444 1,340 Suffolk Cnty, NY Indl Dev Agy Indl Dev Rev Spellman High Voltage Fac Ser A (AMT)...... 6.375 12/01/17 1,321,669 4,000 Suffolk Cnty, NY Indl Dev Agy Medford Hamlet Asstd Living Proj (AMT)............. 6.375 01/01/39 4,013,600
30 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 1,445 Suffolk Cnty, NY Indl Dev Agy Peconic Landing Ser A.............................. 8.000% 10/01/20 $ 1,618,530 1,000 Syracuse, NY Indl Dev Agy Rev First Mtg Jewish Home Ser A.......................... 7.375 03/01/31 1,070,080 5,000 Tsasc Inc. NY Rols RR II R 513CE 2 (Inverse Fltg) (Acquired 03/01/06, Cost $4,936,300) (a)........................................ 6.537 06/01/26 4,880,450 2,700 Ulster Cnty, NY Indl Dev Agy Civic Fac Rev Benedictine Hosp Proj Ser A................ 6.450 06/01/24 2,597,859 2,315 Utica, NY Indl Dev Agy Civic Utica College Civic Fac.................................. 6.750 12/01/21 2,425,263 1,000 Westchester Cnty, NY Indl Dev Hebrew Hosp Sr Hsg Inc Ser A........................... 7.375 07/01/30 1,078,100 -------------- 131,841,122 -------------- NORTH CAROLINA 0.3% 2,000 North Carolina Med Care Commn First Mtg Utd Methodist Homes (Prerefunded @ 10/01/09)................... 7.000 10/01/17 2,208,460 2,600 North Carolina Med Care Commn Retirement Fac Rev First Mtg Ser A 05................. 5.500 10/01/35 2,613,312 -------------- 4,821,772 -------------- NORTH DAKOTA 0.2% 2,000 Grand Forks, ND Sr Hsg Rev Spl Term 4000 Vly Square Proj............................ 6.250 12/01/34 2,006,040 940 Grand Forks, ND Sr Hsg Rev Spl Term 4000 Vly Square Proj............................ 6.375 12/01/34 945,048 -------------- 2,951,088 -------------- OHIO 3.4% 10,200 Adams Cnty Hosp Fac Impt Rev Adams Cnty Hosp Proj.................................. 6.500 09/01/36 10,305,774 5,000 Athens Cnty, OH Hosp Fac Rev Impt O'Bleness Mem Ser A Rfdg............................. 7.125 11/15/33 5,436,400 3,000 Cleveland-Cuyahoga Cnty, OH Spl Assmt/ Tax Increment.................................. 7.000 12/01/18 3,167,730 1,000 Cuyahoga Cnty, OH Hlthcare Fac Franciscan Cnty OH Inc Proj Ser C..................... 6.250 05/15/32 1,019,740 5,000 Cuyahoga Cnty, OH Rev Ser A Rfdg........... 6.000 01/01/32 5,530,800 1,760 Dayton, OH Spl Fac Rev Air Freight Cargo Day LLC Proj (AMT)......................... 6.300 04/01/22 1,697,379 7,510 Erie Cnty, OH Hosp Fac Rev Firelands Regl Med Ctr Ser A.............................. 5.625 08/15/32 7,807,696 5,955 Franklin Cnty, OH Hlthcare Fac Rev Impt Lutheran Sr City Proj Rfdg................. 6.125 12/15/28 5,787,367 2,600 Franklin Cnty, OH Hlthcare Fac Rev Impt OH Presbyterian Svc Ser A..................... 5.125 07/01/35 2,623,244
See Notes to Financial Statements 31 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- OHIO (CONTINUED) $ 1,500 Lucas Cnty, OH Hlthcare & Impt Sunset Retirement Rfdg............................ 6.500% 08/15/20 $ 1,610,655 750 Lucas Cnty, OH Port Auth Rev Saint Mary Woods Proj Ser A........................... 6.000 05/15/24 762,780 2,250 Lucas Cnty, OH Port Auth Rev Saint Mary Woods Proj Ser A........................... 6.000 05/15/34 2,269,215 2,840 Madison Cnty, OH Hosp Impt Rev Madison Cnty Hosp Proj Rfdg (Prerefunded @ 08/01/08).... 6.400 08/01/28 2,985,323 4,340 Norwood, OH Tax Increment Rev Fin Cornerstone at Norwood..................... 6.200 12/01/31 4,343,472 -------------- 55,347,575 -------------- OKLAHOMA 3.4% 1,000 Citizen Potawatomi Nation, OK Ser A........ 6.500 09/01/16 1,054,780 520 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.000 08/01/10 528,544 750 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.400 08/01/17 769,073 1,000 Langston, OK Econ Dev Langston Cmnty Dev Corp Proj Ser A............................ 7.625 08/01/20 1,031,650 1,000 Norman, OK Regl Hosp Auth Hosp Rev......... 5.375 09/01/29 1,010,680 3,000 Norman, OK Regl Hosp Auth Hosp Rev......... 5.375 09/01/36 3,028,440 2,000 Oklahoma Cnty, OK Fin Auth Rev Epworth Villa Proj Rfdg............................ 6.000 04/01/18 2,034,180 750 Oklahoma Cnty, OK Fin Auth Rev Epworth Villa Proj Ser A Rfdg...................... 5.700 04/01/25 757,403 1,000 Oklahoma Cnty, OK Fin Auth Rev Epworth Villa Proj Ser A Rfdg...................... 7.000 04/01/25 1,032,460 1,250 Oklahoma Cnty, OK Fin Auth Rev Epworth Villa Proj Ser A Rfdg...................... 5.875 04/01/30 1,273,175 1,500 Oklahoma Cnty, OK Fin Auth Rev Retirement Fac Concordia Ser A........................ 6.125 11/15/25 1,512,345 5,500 Oklahoma Cnty, OK Fin Auth Rev Retirement Fac Concordia Ser A........................ 6.000 11/15/38 5,497,195 1,065 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg (Prerefunded @ 08/15/09).................................. 5.750 08/15/12 1,140,700 1,000 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg (Prerefunded @ 08/15/09).................................. 5.750 08/15/15 1,071,080 4,000 Oklahoma Dev Fin Auth Rev Hillcrest Hlthcare Sys Ser A Rfdg (Prerefunded @ 08/15/09).................................. 5.625 08/15/19 4,268,640 3,250 Tulsa Cnty, OK Pub Fac Auth (Prerefunded @ 11/01/09) (AMBAC Insd)..................... 6.250 11/01/22 3,585,498 6,365 Tulsa, OK Muni Arpt Tr Rev Amern Airl Proj Rfdg....................................... 6.250 06/01/20 6,343,041 16,855 Tulsa, OK Muni Arpt Tr Rev Ser A Rfdg (AMT)...................................... 7.750 06/01/35 18,266,943 -------------- 54,205,827 --------------
32 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- OREGON 0.8% $ 2,000 Clackamas Cnty, OR Hosp Fac Willamette View Inc Proj Ser A (Prerefunded @ 11/01/09).... 7.500% 11/01/29 $ 2,262,200 2,145 Clatsop Care Ctr Hlth Dist OR Rev Sr Hsg... 6.875 08/01/28 2,164,241 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 2,565,075 5,093 Oregon St Hlth Hsg Ed & Cultural Fac Auth (AMT)...................................... 7.250 06/01/28 5,164,559 970 Oregon St Hlth Hsg Ed Auth OR Baptist Retirement Homes Ser A..................... 8.000 11/15/26 998,101 -------------- 13,154,176 -------------- PENNSYLVANIA 4.5% 2,000 Allegheny Cnty, PA Hosp Dev Auth Rev OH Vly Gen Hosp Proj Ser A........................ 5.125 04/01/35 1,995,200 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/15 2,398,820 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/22 2,391,420 2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser B.......................................... 9.250 11/15/30 2,389,580 2,000 Allegheny Cnty, PA Indl Dev Auth Lease Rev (AMT)...................................... 6.625 09/01/24 2,007,600 1,500 Allegheny Cnty, PA Redev Auth Pittsburgh Mills Proj................................. 5.600 07/01/23 1,579,365 1,000 Berks Cnty, PA Muni Auth Rev Phoebe Berks Vlg Inc Proj Rfdg (Prerefunded @ 05/15/06).................................. 7.700 05/15/22 1,024,650 1,500 Bucks Cnty, PA Indl Dev Auth Retirement Cmty Rev Ann's Choice Inc Fac Ser A........ 6.125 01/01/25 1,555,485 1,250 Bucks Cnty, PA Indl Dev Auth Retirement Cmty Rev Ann's Choice Inc Fac Ser A........ 6.250 01/01/35 1,292,450 1,000 Bucks Cnty, PA Indl Dev Auth Rev First Mtg Hlthcare Fac Chandler...................... 6.200 05/01/19 1,002,930 1,800 Bucks Cnty, PA Indl Dev Auth Rev First Mtg Hlthcare Fac Chandler...................... 6.300 05/01/29 1,795,536 1,500 Chester Cnty, PA Hlth & Ed Fac Chester Cnty Hosp Ser A................................. 6.750 07/01/31 1,634,580 2,000 Cumberland Cnty, PA Indl Dev Auth Rev First Mtg Woods Cedar Run Ser A Rfdg (b)......... 6.500 11/01/28 741,640 3,000 Dauphin Cnty, PA Gen Auth Rev Office & Pkg Riverfront Office.......................... 6.000 01/01/25 2,790,900 2,200 Indiana Cnty, PA Indl Dev Auth PSEG Pwr LLC Proj Rfdg (AMT)............................ 5.850 06/01/27 2,317,832 1,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Ctr Saint Anne's Home.......................... 6.625 04/01/28 1,035,540 1,200 Lehigh Cnty, PA Gen Purp Auth First Mtg Bible Fellowship Church.................... 7.625 11/01/21 1,325,328 3,000 Lehigh Cnty, PA Gen Purp Auth Rev Good Shepherd Group Ser A....................... 5.500 11/01/24 3,140,820
See Notes to Financial Statements 33 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) $ 3,585 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace Oblig Grp (d).............................. 6.200% 11/01/14 $ 3,537,965 5,500 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace Oblig Grp Rfdg............................. 6.000 11/01/23 5,286,215 1,000 Lehigh Cnty, PA Indl Dev Auth Hlth Fac Rev Lifepath Inc Proj.......................... 6.100 06/01/18 956,900 1,085 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj.................. 6.000 02/01/21 1,144,187 4,500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj.................. 6.250 02/01/35 4,781,745 1,390 Northeastern PA Hosp & Ed Auth Hlthcare Rev............................... 7.125 10/01/29 1,430,546 1,690 Northeastern PA Hosp & Ed Auth Hlthcare Rev Oakwood Ter Proj (Acquired 12/27/05, Cost $1,690,000) (a) (d)........................ 6.500 10/01/32 1,690,000 1,500 Pennsylvania Econ Dev Fin Auth Reliant Energy Ser A (AMT)......................... 6.750 12/01/36 1,601,910 3,000 Pennsylvania Econ Dev Fin Auth Reliant Energy Seward Ser A (AMT).................. 6.750 12/01/36 3,203,820 980 Pennsylvania St Higher Ed Student Assn Inc Proj Ser A................................. 6.750 09/01/32 1,044,337 6,400 Philadelphia, PA Arpt Rev Ser A (AMT) (MBIA Insd)...................................... 4.750 06/15/35 6,305,088 2,150 Philadelphia, PA Auth Indl Dev Rev Coml Dev Rfdg....................................... 7.750 12/01/17 2,175,757 1,925 Philadelphia, PA Hosp & Higher Ed Fac Auth Rev Centralized Comp Human Svc Ser A....... 6.125 01/01/13 1,906,482 1,500 Scranton Lackawanna, PA Hlth & Welfare Auth Rev Rfdg (Prerefunded @ 01/15/07).......... 7.250 01/15/17 1,567,425 2,000 Scranton Lackawanna, PA Hlth & Welfare Auth Rev Rfdg (Prerefunded @ 01/15/07).......... 7.350 01/15/22 2,091,440 1,500 Westmoreland Cnty, PA Indl Dev Hlthcare Fac Redstone Ser B (Prerefunded @ 11/15/10).... 8.000 11/15/23 1,756,725 -------------- 72,900,218 -------------- RHODE ISLAND 0.4% 1,825 Rhode Island St Econ Dev Corp Rev Oblig Providence Pl.............................. 7.250 07/01/20 1,868,764 1,000 Rhode Island St Hlth & Ed Hosp Fin Ser A (Prerefunded @ 09/15/08)................... 6.000 09/15/33 1,051,930 3,000 Tobacco Settlement Fin Corp RI Asset Bkd Ser A...................................... 6.000 06/01/23 3,148,350 -------------- 6,069,044 --------------
34 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- SOUTH CAROLINA 1.3% $ 1,700 Lancaster Cnty, SC Assmt Rev Sun City Carolina Lakes Impt........................ 5.450% 12/01/37 $ 1,715,368 3,000 South Carolina Jobs Econ Dev Auth Econ Dev Rev Westminster Impt & Rfdg................ 5.375 11/15/30 2,977,530 1,570 South Carolina Jobs Econ Dev Auth Hosp Fac Rev Palmetto Hlth Alliance Ser A Impt & Rfdg....................................... 6.250 08/01/31 1,733,186 2,965 South Carolina Jobs Econ Dev Auth Student Hdg Rev Drivers Ser 650 (Inverse Fltg) (Acquired 12/17/04, Cost $3,437,858) (MBIA Insd) (a) (d).............................. 7.253 08/01/12 3,426,532 1,000 South Carolina Jobs Econ Dev Episcopal Home Still Proj A............................... 6.000 05/15/17 1,019,930 2,000 South Carolina Jobs Econ Dev First Mtg Westley Com Proj........................... 7.750 10/01/24 2,180,140 4,500 South Carolina Jobs Econ Dev First Mtg Westley Com Proj........................... 8.000 10/01/31 4,930,560 3,000 Tobacco Settlement Rev Mgmt Auth SC Tob Settlement Rev Ser B....................... 6.375 05/15/28 3,216,600 -------------- 21,199,846 -------------- SOUTH DAKOTA 0.5% 1,010 Keystone, SD Econ Dev Rev Wtr Quality Mgmt Corp Ser A (AMT)........................... 6.000 12/15/18 1,010,152 5,440 Sioux Falls, SD Multi-Family Hsg Inn Westport Proj Ser A (Acquired 01/26/04 to 04/27/05, Cost $5,613,880) (a)............. 7.500 12/01/34 5,592,810 1,050 South Dakota St Hlth & Ed Fac Auth Rev Sioux Vly Hosp & Hlth Sys Ser A............ 5.250 11/01/34 1,087,139 -------------- 7,690,101 -------------- TENNESSEE 1.6% 3,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg (MBIA Insd)................................ 7.750 07/01/29 3,657,630 1,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn States Hlth Ser A Rfdg....... 7.500 07/01/33 1,164,430 4,950 Johnson City Tn Hlth & Ed Fac Brd Hosp Rev Riles PA 1351 (Inverse Fltg) (Acquired 02/02/06, Cost $5,313,231) (a) (d)......... 6.875 07/01/36 5,390,897 1,000 Johnson City, TN Hlth & Ed Fac Brd Retirement Fac Rev Appalachian Christian Vlg Proj Ser A............................. 6.250 02/15/32 1,034,420 1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg Ser A...................................... 7.000 12/01/23 1,048,740 1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg Ser A...................................... 7.250 12/01/34 1,059,930 1,000 Shelby Cnty TN Hlth Ed & Hsg Fac Brd Rev Trezevant Manor Proj Ser A................. 5.625 09/01/26 997,300
See Notes to Financial Statements 35 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- TENNESSEE (CONTINUED) $ 2,500 Shelby Cnty TN Hlth Ed & Hsg Fac Brd Rev Trezevant Manor Proj Ser A................. 5.750% 09/01/37 $ 2,506,850 5,130 Sullivan Cnty, TN Hlth Ed & Hsg Fac Brd Rev (d)........................................ 8.410 11/01/19 5,373,367 2,725 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj Ser A (Acquired 06/08/89, Cost $2,725,000) (a) (d)................... 10.000 11/01/19 2,900,735 1,160 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj Ser B (Acquired 06/08/89, Cost $1,160,000) (a) (b) (d)............... 10.000 11/01/20 123,911 -------------- 25,258,210 -------------- TEXAS 9.3% 435 Abia Dev Corp TX Arpt Fac Rev Austin Belly Port Dev LLC Proj Ser A (AMT).............. 6.250 10/01/08 436,492 3,000 Abia Dev Corp TX Arpt Fac Rev Austin Belly Port Dev LLC Proj Ser A (AMT).............. 6.500 10/01/23 2,984,520 1,000 Atlanta, TX Hosp Auth Fac Rev.............. 6.700 08/01/19 1,040,260 2,035 Atlanta, TX Hosp Auth Fac Rev.............. 6.750 08/01/29 2,086,791 990 Austin-Bergstorm Landhost Enterprises Inc TX Arpt Hotel Sr Ser A (g)................. 6.750 04/01/27 592,961 990 Bexar Cnty, TX Hsg Fin Corp Multi-Family Hsg Rev Woodland Ridge Apt Proj Ser A (AMT)...................................... 7.000 01/01/39 1,003,712 2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp..... 5.375 01/01/32 2,052,700 735 Comal Cnty, TX Hlth Fac Dev Hlthcare Sys McKenna Mem Proj Ser A..................... 6.250 02/01/32 782,106 1,825 Dallas Cnty, TX Flood Ctl Dist No 1 Cap Apprec Rfdg (Acquired 08/28/89, Cost $660,829) (a).............................. * 08/01/11 1,369,626 3,445 Dallas Cnty, TX Flood Ctl Dist No 1 Rfdg... 7.250 04/01/32 3,602,815 4,305 Dallas Cnty, TX Flood Ctl Dist Rfdg (d).... 6.750 04/01/16 4,540,096 2,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth Sys Ser A.................................. 7.000 09/01/25 2,712,975 3,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth Sys Ser A.................................. 7.125 09/01/34 3,798,865 1,500 Grand Prairie, TX Hsg Fin Corp Indpt Sr Living Ctr Rev............................. 7.500 07/01/17 1,562,670 3,000 Grand Prairie, TX Hsg Fin Corp Indpt Sr Living Ctr Rev............................. 7.750 01/01/34 3,124,170 6,400 Houston, TX Arpt Sys Rev Spl Fac Contl Airl Ser B (AMT)................................ 6.125 07/15/17 6,276,864 500 Houston, TX Arpt Sys Rev Spl Fac Contl Airl Ser C (AMT)................................ 5.700 07/15/29 437,155 22,130 Houston, TX Arpt Sys Rev Spl Fac Contl Airl Ser E (AMT)................................ 6.750 07/01/21 22,447,123 8,115 Houston, TX Arpt Sys Rev Spl Fac Contl Airl Ser E (AMT)................................ 6.750 07/01/29 8,231,288
36 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 1,750 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT) (FSA Insd)........................... 5.125% 07/01/32 $ 1,781,588 3,000 Houston, TX Hlth Fac Dev Corp Buckingham Sr Living Cmnty Ser A......................... 7.125 02/15/34 3,291,930 17,750 Houston TX Util Sys Rev Comb First Lien Ser A Rfdg (MBIA Insd) (c)..................... 5.125 05/15/28 18,618,685 3,750 Kerrville, TX Hlth Fac Dev Corp Hosp Rev Sid Peterson Mem Hosp Proj................. 5.375 08/15/35 3,787,538 3,750 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $3,784,875) (FSA Insd) (a)................. 7.769 05/15/15 4,278,450 8,880 Lower CO River Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $9,073,939) (FSA Insd) (a)................. 7.769 05/15/14 10,104,286 10,000 Lubbock, TX Hlth Fac Dev Corp Rev Ref First Mtg Carillon Proj A Rfdg................... 6.625 07/01/36 9,868,800 1,330 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg Carillon Proj Ser A (Prerefunded @ 07/01/09).................................. 6.500 07/01/19 1,432,836 2,255 Meadow Parc Dev Inc TX Multi-Family Rev Hsg Meadow Parc Apt Proj....................... 6.500 12/01/30 2,275,272 2,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj........................ 7.250 01/01/31 2,582,225 2,755 Midlothian, TX Dev Auth Tax Increment Contract Rev............................... 6.700 11/15/23 2,826,134 2,000 Midlothian, TX Dev Auth Tax Increment Contract Rev............................... 7.875 11/15/26 2,187,520 1,500 Midlothian, TX Dev Auth Tax Increment Contract Rev (Acquired 12/02/04, Cost $1,500,000) (a)............................ 6.200 11/15/29 1,503,030 1,000 Richardson, TX Hosp Auth Rev Baylor & Richardson Impt & Rfdg..................... 5.625 12/01/28 1,026,000 250 San Antonio, TX Hlth Fac Dev Corp Rev Encore Nursing Ctr Part.................... 8.250 12/01/19 250,140 1,350 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev (AMT) (GNMA Collateralized)............ 6.900 07/02/24 1,360,706 1,675 Texas St Pub Fin Auth Sch Excellence Ed Proj Ser A (Acquired 12/02/04, Cost $1,654,197) (a)....................... 7.000 12/01/34 1,732,419 1,500 Texas St Student Hsg Corp MSU Proj Midwestn St Univ.................................... 6.500 09/01/34 1,624,590 2,950 Tomball, TX Hosp Auth Rev Hosp Tomball Regl Hosp....................................... 6.000 07/01/29 3,045,757 1,000 Travis Cnty, TX Hlth Fac Dev Corp Retirement Fac Rev Querencia Barton Creek Proj....................................... 5.500 11/15/25 986,940
See Notes to Financial Statements 37 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 2,950 Travis Cnty, TX Hlth Fac Dev Corp Retirement Fac Rev Querencia Barton Creek Proj....................................... 5.650% 11/15/35 $ 2,898,995 945 Wichita Cnty, TX Hlth Fac Rolling Meadows Fac Ser A Rfdg............................. 6.250 01/01/28 960,763 2,500 Woodhill Pub Fac Corp TX Hsg-Woodhill Apt Proj....................................... 7.500 12/01/29 2,415,250 -------------- 149,923,043 -------------- UTAH 0.2% 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (b)................................... 7.800 09/01/15 360,000 1,165 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (b)................................... 8.000 09/01/20 419,400 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (b)................................... 7.800 09/01/25 360,000 2,395 Utah St Hsg Fin Agy Rev RHA Cmnty Svc Proj Ser A...................................... 6.875 07/01/27 2,419,788 35 Utah St Hsg Fin Agy Single Family Mtg Mezz A1 (AMBAC Insd)............................ 6.100 07/01/13 35,744 -------------- 3,594,932 -------------- VERMONT 0.2% 1,000 Vermont Ed & Hlth Bldg Fin Agy Rev Bennington College Proj.................... 6.625 10/01/29 1,032,970 1,910 Vermont Ed & Hlth Bldg Fin Agy Rev Hlthcare Fac Copley Manor Proj...................... 6.500 04/01/33 1,298,953 1,000 Vermont Ed & Hlth Bldg Fin Agy Rev VT Council Dev Mental Hlth Ser A.............. 6.000 12/15/09 1,047,010 -------------- 3,378,933 -------------- VIRGINIA 1.8% 4,000 Albemarle Cnty, VA Indl Dev Auth Ed Fac Rev Covenant Sch Inc Ser A..................... 7.750 07/15/32 4,417,800 2,500 Henrico Cnty, VA Econ Dev Auth Residential Care Fac Rev Utd Methodist Ser A Rfdg...... 6.500 06/01/22 2,673,450 6,000 Peninsula Port Auth VA Residential Care Fac Rev VA Baptist Homes Ser A................. 7.375 12/01/32 6,672,000 4,000 Roanoke Cnty, VA Indl Dev Auth Glebe Inc Ser A...................................... 6.300 07/01/35 4,118,640 8,810 Tobacco Settlement Fin Corp VA Rites PA 1341 (Inverse Fltg) (Acquired 12/07/05, Cost $8,844,888) (a)....................... 6.653 06/01/37 9,303,889 1,700 Virginia Small Business Fin Auth Rev Indl Dev SIL Clean Wtr Proj (AMT)............... 7.250 11/01/24 1,763,835 -------------- 28,949,614 --------------
38 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- WASHINGTON 0.7% $ 1,000 King Cnty, WA Pub Hosp Dist No 004 Snoqualmie Vly Hosp........................ 7.250% 12/01/15 $ 1,061,780 8,830 Tobacco Settlement Auth WA Asset Bkd....... 6.625 06/01/32 9,720,859 -------------- 10,782,639 -------------- WISCONSIN 1.1% 800 Baldwin, WI Hosp Rev Mtg Ser A............. 6.125 12/01/18 803,744 1,000 Baldwin, WI Hosp Rev Mtg Ser A............. 6.375 12/01/28 1,005,450 1,745 Milwaukee, WI Rev Sr Air Cargo (AMT)....... 6.500 01/01/25 1,880,133 750 Wisconsin Hlth & Ed Fac Eastcastle Pl Inc Proj................................... 6.000 12/01/24 768,713 2,000 Wisconsin St Hlth & Ed Fac Auth Rev Aurora Hlthcare Inc Ser A......................... 5.600 02/15/29 2,048,920 3,000 Wisconsin St Hlth & Ed Fac Auth Rev Milwaukee Catholic Home Inc Proj........... 7.500 07/01/26 3,068,430 1,000 Wisconsin St Hlth & Ed Fac Auth Rev Oakwood Vlg Proj Ser A............................. 7.625 08/15/30 1,093,010 1,500 Wisconsin St Hlth & Ed Fac Beaver Dam Cmnty Hosp Inc Ser A............................. 6.750 08/15/34 1,625,370 1,000 Wisconsin St Hlth & Ed Fac Divine Savior Hlthcare Ser C (Prerefunded @ 05/01/12).... 7.500 05/01/32 1,173,610 2,000 Wisconsin St Hlth & Ed Fac Fort Hlthcare Inc Proj................................... 6.100 05/01/34 2,183,180 1,500 Wisconsin St Hlth & Ed Fac Southwest Hlth Ctr Ser A.................................. 6.125 04/01/24 1,533,735 -------------- 17,184,295 -------------- WYOMING 0.4% 4,000 Sweetwater Cnty, WY Solid Waste Disp Rev Corp Proj Rfdg (AMT)....................... 5.600 12/01/35 4,157,040 1,500 Teton Cnty, WY Hosp Dist Hosp Saint Johns Med Ctr.................................... 6.750 12/01/27 1,590,555 -------------- 5,747,595 -------------- PUERTO RICO 1.3% 15,000 Puerto Rico Comwlth Hwy & Trans Auth Trans Rev Ser K.................................. 5.000 07/01/40 15,131,550 465 Puerto Rico Port Auth Rev Spl Fac Amern Airl Ser A (AMT)........................... 6.250 06/01/26 425,224 5,000 Puerto Rico Pub Bldg Auth Rev Govt Fac Ser I...................................... 5.250 07/01/33 5,217,150 -------------- 20,773,924 --------------
See Notes to Financial Statements 39 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- U. S. VIRGIN ISLANDS 0.2% $ 2,500 Northern Mariana Islands Ser A............. 7.375% 06/01/30 $ 2,743,725 1,000 Virgin Islands Pub Fin Auth Resr Secd- Hovensa Refinery (AMT)..................... 5.875 07/01/22 1,090,210 -------------- 3,833,935 -------------- TOTAL MUNICIPAL BONDS 99.7%................................................. 1,612,995,408 -------------- NUMBER OF DESCRIPTION SHARES VALUE - ----------------------------------------------------------------------------------------------- EQUITY 0.0% GMT Holdings, LLC (h)............................................. 2,240 $ 0 -------------- TOTAL LONG-TERM INVESTMENTS 99.7% (Cost $1,564,737,102)....................................................... 1,612,995,408 SHORT-TERM INVESTMENT 0.0% (Cost $900,000)............................................................. 900,000 -------------- TOTAL INVESTMENTS 99.7% (Cost $1,565,637,102)....................................................... 1,613,895,408 OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%................................... 4,459,298 -------------- NET ASSETS 100.0%............................................................ $1,618,354,706 ==============
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 14.2% of net assets. (b) Non-income producing security. (c) Securities purchased on a when-issued or delayed delivery basis. (d) The Fund owns 100% of the outstanding bond issuance. (e) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (f) Payment-in-kind security. (g) Interest is accruing at less than the stated coupon. (h) Market value is determined in accordance with procedures established in good faith by the Board of Trustees. 40 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued 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. See Notes to Financial Statements 41 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2006 (Unaudited) ASSETS: Total Investments (Cost $1,565,637,102)..................... $1,613,895,408 Cash........................................................ 282,549 Receivables: Investments Sold.......................................... 31,221,224 Interest.................................................. 29,035,215 Fund Shares Sold.......................................... 1,961,513 Other....................................................... 191,854 -------------- Total Assets............................................ 1,676,587,763 -------------- LIABILITIES: Payables: Investments Purchased..................................... 50,540,373 Fund Shares Repurchased................................... 3,789,197 Income Distributions...................................... 2,263,484 Investment Advisory Fee................................... 639,825 Distributor and Affiliates................................ 628,516 Trustees' Deferred Compensation and Retirement Plans........ 249,946 Accrued Expenses............................................ 121,716 -------------- Total Liabilities....................................... 58,233,057 -------------- NET ASSETS.................................................. $1,618,354,706 ============== NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $1,693,999,709 Net Unrealized Appreciation................................. 48,258,306 Accumulated Undistributed Net Investment Income............. (3,825,995) Accumulated Net Realized Loss............................... (120,077,314) -------------- NET ASSETS.................................................. $1,618,354,706 ============== MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $1,288,482,312 and 96,784,281 shares of beneficial interest issued and outstanding)............. $ 13.31 Maximum sales charge (4.75%* of offering price)......... .66 -------------- Maximum offering price to public........................ $ 13.97 ============== Class B Shares: Net asset value and offering price per share (Based on net assets of $131,146,166 and 9,857,097 shares of beneficial interest issued and outstanding)............. $ 13.30 ============== Class C Shares: Net asset value and offering price per share (Based on net assets of $198,726,228 and 14,820,613 shares of beneficial interest issued and outstanding)............. $ 13.41 ==============
* On sales of $100,000 or more, the sales charge will be reduced. 42 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2006 (Unaudited) INVESTMENT INCOME: Interest.................................................... $48,993,408 ----------- EXPENSES: Investment Advisory Fee..................................... 3,725,746 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $1,598,988, $693,208 and $991,913, respectively)............................................. 3,284,109 Shareholder Services........................................ 378,636 Legal....................................................... 86,852 Custody..................................................... 80,791 Trustees' Fees and Related Expenses......................... 21,433 Other....................................................... 339,786 ----------- Total Expenses.......................................... 7,917,353 Less Credits Earned on Cash Balances.................... 28,941 ----------- Net Expenses............................................ 7,888,412 ----------- NET INVESTMENT INCOME....................................... $41,104,996 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $(4,452,616) Futures................................................... 77,287 ----------- Net Realized Loss........................................... (4,375,329) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 32,455,361 End of the Period......................................... 48,258,306 ----------- Net Unrealized Appreciation During the Period............... 15,802,945 ----------- NET REALIZED AND UNREALIZED GAIN............................ $11,427,616 =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $52,532,612 ===========
See Notes to Financial Statements 43 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, 2006 SEPTEMBER 30, 2005 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 41,104,996 $ 64,808,196 Net Realized Loss.................................... (4,375,329) (24,372,853) Net Unrealized Appreciation During the Period........ 15,802,945 43,414,445 -------------- -------------- Change in Net Assets from Operations................. 52,532,612 83,849,788 -------------- -------------- Distributions from Net Investment Income: Class A Shares..................................... (34,767,318) (55,305,117) Class B Shares..................................... (3,300,416) (6,722,269) Class C Shares..................................... (4,676,007) (6,404,362) -------------- -------------- Total Distributions.................................. (42,743,741) (68,431,748) -------------- -------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... 9,788,871 15,418,040 -------------- -------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 108,469,388 800,745,467 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 28,747,797 45,579,353 Cost of Shares Repurchased........................... (140,890,747) (223,389,642) -------------- -------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (3,673,562) 622,935,178 -------------- -------------- TOTAL INCREASE IN NET ASSETS......................... 6,115,309 638,353,218 NET ASSETS: Beginning of the Period.............................. 1,612,239,397 973,886,179 -------------- -------------- End of the Period (Including accumulated undistributed net investment income of $(3,825,995) and ($2,187,250), respectively).................... $1,618,354,706 $1,612,239,397 ============== ==============
44 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, -------------------------------------------------- 2006 2005 2004 2003 2002 (a) 2001 ---------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $ 13.23 $ 13.00 $13.03 $13.21 $13.25 $13.27 -------- -------- ------ ------ ------ ------ Net Investment Income.......... .35(c) .72(c) .74(c) .79 .78 .77 Net Realized and Unrealized Gain/Loss.................... .09 .27 -0- (.25) (.11) (.05) -------- -------- ------ ------ ------ ------ Total from Investment Operations..................... .44 .99 .74 .54 .67 .72 Less Distributions from Net Investment Income............ .36 .76 .77 .72 .71 .74 -------- -------- ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD......................... $ 13.31 $ 13.23 $13.00 $13.03 $13.21 $13.25 ======== ======== ====== ====== ====== ====== Total Return (b)................. 3.40%* 7.75% 5.87% 4.21% 5.28% 5.46% Net Assets at End of the Period (In millions).................. $1,288.5 $1,267.3 $766.1 $560.9 $579.1 $607.1 Ratio of Expenses to Average Net Assets......................... .83% .86% .91% .89% .86% .87% Ratio of Net Investment Income to Average Net Assets............. 5.29% 5.41% 5.74% 6.07% 5.99% 5.88% Portfolio Turnover............... 35%* 48% 16% 14% 14% 22%
* 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. 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) Based on average shares outstanding. See Notes to Financial Statements 45 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, ------------------------------------------------ 2006 2005 2004 2003 2002 (a) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $13.22 $12.99 $13.02 $13.20 $13.24 $13.27 ------ ------ ------ ------ ------ ------ Net Investment Income........... .30(c) .62(c) .65(c) .69(c) .70 .68 Net Realized and Unrealized Gain/Loss..................... .09 .27 (.01) (.25) (.12) (.06) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .39 .89 .64 .44 .58 .62 Less Distributions from Net Investment Income............... .31 .66 .67 .62 .62 .65 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.30 $13.22 $12.99 $13.02 $13.20 $13.24 ====== ====== ====== ====== ====== ====== Total Return (b).................. 2.94%* 7.04% 5.07% 3.42% 4.49% 4.71% Net Assets at End of the Period (In millions)................... $131.1 $144.9 $123.8 $115.6 $149.5 $176.5 Ratio of Expenses to Average Net Assets.......................... 1.58% 1.61% 1.67% 1.64% 1.62% 1.63% Ratio of Net Investment Income to Average Net Assets.............. 4.54% 4.67% 5.00% 5.32% 5.23% 5.12% Portfolio Turnover................ 35%* 48% 16% 14% 14% 22%
* 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. 46 See Notes to Financial Statements VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS (UNAUDITED) continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS C SHARES MARCH 31, ------------------------------------------------ 2006 2005 2004 2003 2002 (a) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $13.32 $13.09 $13.11 $13.20 $13.24 $13.27 ------ ------ ------ ------ ------ ------ Net Investment Income........... .30(d) .62(d) .64(d) .79(d) .70 .68 Net Realized and Unrealized Gain/Loss..................... .10 .27 .01 (.26) (.12) (.06) ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .40 .89 .65 .53 .58 .62 Less Distributions from Net Investment Income............... .31 .66 .67 .62 .62 .65 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $13.41 $13.32 $13.09 $13.11 $13.20 $13.24 ====== ====== ====== ====== ====== ====== Total Return (b).................. 2.99%* 6.98% 5.10%(e) 4.10%(c) 4.49% 4.71% Net Assets at End of the Period (In millions)................... $198.7 $200.0 $ 84.0 $ 34.3 $ 38.5 $ 44.4 Ratio of Expenses to Average Net Assets.......................... 1.58% 1.62% 1.65%(e) 1.64% 1.62% 1.62% Ratio of Net Investment Income to Average Net Assets.............. 4.54% 4.62% 4.94%(e) 6.00%(c) 5.23% 5.13% Portfolio Turnover................ 35%* 48% 16% 14% 14% 22%
* 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 7). See Notes to Financial Statements 47 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 seek to provide investors a high level of current income exempt from federal income tax primarily through investment in a diversified portfolio of medium- and lower-grade municipal securities. The Fund commenced investment operations on June 28, 1985. The Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class-specific expenses and voting rights on matters affecting a single class. As of March 31, 2006, there have been no sales of Class I Shares. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Legal expenditures that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2006, the Fund had $28,417,614 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. 48 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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, 2005, the Fund had an accumulated capital loss carryforward for tax purposes of $92,093,340 which will expire according to the following schedule.
AMOUNT EXPIRATION $ 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 28,957,443................................................. September 30, 2013
At March 31, 2006, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $1,564,966,234 ============== Gross tax unrealized appreciation........................... $ 70,903,013 Gross tax unrealized depreciation........................... (21,973,839) -------------- Net tax unrealized appreciation on investments.............. $ 48,929,174 ==============
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, 2005 was as follows: Distributions paid from: Ordinary income........................................... $ 1,843 Tax-exempt income......................................... 67,834,052 Long-term capital gain.................................... -0- ----------- $67,835,895 ===========
As of September 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed Ordinary income............................... $ 48,591 Undistributed Tax-exempt income............................. 6,277,544
49 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued Net realized gains or losses may differ for financial reporting and tax purposes primarily as a result of the deferral of losses relating to wash sale transactions and the capitalization of reorganization and restructuring costs. F. EXPENSE REDUCTIONS During the six months ended March 31, 2006, the Fund's custody fee was reduced by $28,941 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, 2006, the Fund recognized expenses of approximately $16,700 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment agreements, the Adviser provides accounting and legal services and the CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $89,600 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser, serves as the shareholder servicing agent of the Fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $334,800 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are 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 $153,558 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2006. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net 50 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. For the six months ended March 31, 2006, Van Kampen, as distributor for the Fund, received commissions on sales of the Fund's Class A shares of approximately $200,600 and CDSC on redeemed shares of approximately $135,900. Sales charges do not represent expenses of the Fund. 3. CAPITAL TRANSACTIONS For the six months ended March 31, 2006 and the year ended September 30, 2005, transactions were as follows:
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2006 SEPTEMBER 30, 2005 ---------------------------- ---------------------------- SHARES VALUE SHARES VALUE Sales: Class A....................... 6,893,800 $ 91,224,095 46,042,142 $ 610,280,678 Class B....................... 191,696 2,533,497 3,997,568 52,841,157 Class C....................... 1,104,505 14,711,796 10,302,312 137,623,632 ----------- ------------- ----------- ------------- Total Sales..................... 8,190,001 $ 108,469,388 60,342,022 $ 800,745,467 =========== ============= =========== ============= Dividend Reinvestment: Class A....................... 1,812,392 $ 23,991,664 2,846,859 $ 37,712,082 Class B....................... 165,155 2,184,422 322,306 4,263,931 Class C....................... 192,933 2,571,711 269,962 3,603,340 ----------- ------------- ----------- ------------- Total Dividend Reinvestment..... 2,170,480 $ 28,747,797 3,439,127 $ 45,579,353 =========== ============= =========== ============= Repurchases: Class A....................... (7,696,263) $(101,773,958) (12,050,561) $(158,836,281) Class B....................... (1,455,304) (19,274,782) (2,891,622) (38,202,420) Class C....................... (1,490,028) (19,842,007) (1,980,028) (26,350,941) ----------- ------------- ----------- ------------- Total Repurchases............... (10,641,595) $(140,890,747) (16,922,211) $(223,389,642) =========== ============= =========== =============
4. REDEMPTION FEE The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within 30 days of purchase. The redemption fee is paid directly to the Fund. For the six months ended March 31, 2006, the Fund received redemption fees of approximately $7,100, which are reported as part of "Cost of Shares Repurchased" on the Statement of Changes in Net Assets. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $553,192,991 and $554,435,823, respectively. 51 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 6. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund 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. Summarized below are the specific types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures contracts on U.S. Treasury Securities and typically closes the contract prior to the delivery date. These contracts are generally used to manage the Fund's effective maturity and duration. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). Transactions in futures contracts for the six months ended March 31, 2006 were as follows:
CONTRACTS Outstanding at September 30, 2005........................... -0- Futures Opened.............................................. 300 Futures Closed.............................................. (300) ---- Outstanding at March 31, 2006............................... -0- ====
B. INDEXED SECURITIES An inverse floating rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. These instruments are identified in the Portfolio of Investments. 7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, 52 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued Class B Shares and Class C Shares to compensate the Distributor for the distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $3,054,200 and $401,600 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. 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 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. Plaintiffs filed a Motion for Leave to file a Supplemental Pleading that would, among other things, expand the allegations and alleged class. The defendants moved to dismiss this action, which motion was granted in its entirety. Additionally, plaintiffs' Motion for Leave to file a Supplemental Pleading was denied. This matter is now concluded. 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 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 53 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued complaint and coordinated with other cases related to market timing that have been centralized in a federal court. Additionally, plaintiff's initial complaint regarding allegations of economic incentives was stayed pending certain procedural developments. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. Defendants' motion to dismiss in the market timing litigation was granted in part and denied in part, and defendants filed a motion for reconsideration of the Court's decision to uphold certain of plaintiff's claims. Additionally, plaintiff and the named Trustees entered into a tolling agreement. The tolling agreement dismisses the Trustees from the action without prejudice in exchange for tolling all claims against the Trustees. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 9. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 54 VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer J. DAVID GERMANY Vice President DENNIS SHEA Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer PHILLIP G. GOFF Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 55 Van Kampen Strategic Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen Strategic Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen Strategic Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 39,399,539 STMI SAR 5/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-01267P-Y03/06 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, 2006. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN A CLASS I SHARE PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/06
A SHARES B SHARES C SHARES I SHARES since 12/13/85 since 4/30/93 since 8/13/93 since 8/12/05 - ----------------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES Since Inception 6.85% 6.59% 4.91 4.91% 4.46 4.46% 1.22% 10-year 5.49 4.97 5.02 5.02 4.72 4.72 -- 5-year 4.69 3.68 4.29 4.04 3.93 3.93 -- 1-year 3.86 -1.08 3.97 0.01 3.09 2.10 -- 6-month 0.98 -3.83 0.95 -2.96 0.54 -0.43 1.05 - ----------------------------------------------------------------------------------------------------- SEC Yield 3.10% 3.51% 2.75% 3.75%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BECAUSE CLASS B SHARES INCURRED LOWER EXPENSES UNDER THE 12B-1 PLAN THAN DID CLASS A SHARES FOR THE FISCAL PERIOD ENDED MARCH 31, 2006, THE TOTAL OPERATING EXPENSE RATIO FOR CLASS B SHARES WAS LOWER AND, AS A RESULT, THE PERFORMANCE OF CLASS B SHARES WAS HIGHER THAN THAT OF CLASS A SHARES. THERE CAN BE NO ASSURANCE THAT THIS WILL CONTINUE TO OCCUR IN THE FUTURE AS THE MAXIMUM FEES PAYABLE BY CLASS B SHARES UNDER THE 12B-1 PLAN ARE HIGHER THAN THOSE PAYABLE BY CLASS A SHARES. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in years one and two and declining to zero after year five), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares 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. Class I shares are available for purchase exclusively by investors through (i) tax-exempt retirement plans with assets of at least $1 million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase plans, defined benefit plans and non-qualified deferred compensation plans), (ii) fee-based investment programs with assets of at least $1 million and (iii) institutional clients with assets of at least $1 million. Class I shares are offered without any sales charges on purchases or sales and do not include combined Rule 12b-1 fees and service fees. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for 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 SIX-MONTH PERIOD ENDED MARCH 31, 2006 MARKET CONDITIONS Despite the shadow of rising oil prices, the devastation of the Gulf Coast hurricanes, and emerging weakness in the housing market, the economy continued to grow during the six-month period ended March 31, 2006. This expansion was more modest in the fourth quarter of 2005, but gained considerable momentum in the first quarter. Against the backdrop of growth and good employment data, the Federal Open Market Committee (the "Fed") continued raising the federal funds target rate during the period, implementing four additional increases of 25 basis points each. The final hike of the period represented the fifteenth consecutive increase -- the longest stretch of increases in 25 years. As the period came to a close, market observers speculated about the Fed's near-term intentions, given the central bank's view that although longer-term inflation appeared contained, commodity prices could amplify inflationary pressures. Returns across the municipal bond market varied significantly. As investors sought income opportunities, lower rated bonds outpaced investment-grade bonds by a wide margin. Long-term bonds earned the best returns, broadly speaking, while bonds in the three-to-seven year range posted the most muted gains. Municipal bond issuance was robust during the final months of 2005. (In fact, 2005 marked a record high for municipal bond volume.) The tide changed in the first quarter of 2006, however. As rising rates discouraged issuers from refinancing debt, national municipal issuance dropped versus the same period a year ago. While supply ebbed, the market's appetite for municipal bonds remained strong, with particularly heavy demand for high yield municipal bond funds. The State of California continued to lead the nation in municipal issuance. Moreover, although new volume dipped during the first quarter of 2006, it did not decline so rapidly as the national average. The state's municipal market has benefited from the continued strengthening of its credit fundamentals. Also, despite his flagging popularity, Governor Schwarzenegger has made progress advancing a number of his municipal funding proposals. The state still faces challenges, however, with budget deficits, pension funding litigation and immigration issues among the most significant. 2 PERFORMANCE ANALYSIS The fund returned 0.98 percent for the six months ended March 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 0.98 percent for the period. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006
- ------------------------------------------------------------------- LEHMAN BROTHERS MUNICIPAL CLASS A CLASS B CLASS C CLASS I BOND INDEX 0.98% 0.95% 0.54% 1.05% 0.98% - -------------------------------------------------------------------
The performance for the four share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and index definition. Because Class B shares incurred lower expenses under the 12b-1 Plan than did Class A shares for the fiscal period ended March 31, 2006, the total operating expense ratio for Class B shares was lower and, as a result, the performance of Class B shares was higher than that of Class A shares. There can be no assurance that this will continue to occur in the future as the maximum fees payable by Class B shares under the 12b-1 Plan are higher than those payable by Class A shares. We managed the fund according to our long-standing "relative value" discipline. Our strategy involved buying bonds when our research indicates they are attractively valued, and then selling them if they reach our return targets. We then invested the proceeds into bonds which we believe offer greater future total return prospects. We used rigorous research to seek fundamentally strong issues with high liquidity. (Liquid securities are those for which there is a robust market of purchasers and sellers.) The fund invests in insured securities, with all bonds holding a credit rating of AAA. Throughout the period, we followed a variety of strategies to pursue yield within the parameters of our quality-driven approach. We positioned the portfolio to reflect our view that yields would continue to rise, with the yields of short-term bonds rising more rapidly than those of long-term bonds. Reflecting this analysis, we kept the fund's duration shorter than that of its benchmark; and this strategy served the fund well. (Duration is a measure of interest rate sensitivity.) The fund also benefited from our view that the long-term segment of the yield curve was most compelling. We sold shorter-maturity bonds that had been pre- refunded, capturing appreciation gains. We purchased longer-term bonds (generally those with maturities of 25 to 30 years), favoring issues with premium coupons and defensive characteristics. In contrast, we avoided non- 3 callable bonds and zero-coupon bonds, as these tend to underperform during periods of rising interest rates. The fund's preference for well-known issues enhanced performance, as these bonds enjoyed demand on the national level. Within its portfolio, the fund maintained a bias to the essential services sector of the market; and this emphasis turned out to be advantageous. As of the close of the period, the fund's largest sector weightings were in the Public Education, Tax Allocation and Public Building sectors. (In contrast, we avoided housing bonds.) We also found attractive yield opportunities by broadening the portfolio to include securities insured by less well-known, but financially sound companies with AAA ratings. These bonds often offered higher yields than comparable issues insured by the most recognized companies. While these factors served the fund in good stead during the period, the fund's relative gains were tempered by its avoidance of a health care issue that performed briskly during the period, due to pre-refunding activity. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. TOP FIVE SECTORS AS OF 3/31/06 RATINGS ALLOCATIONS AS OF 3/31/06 Public Education 23.0% AAA/Aaa 100% Tax Allocation 18.7 Public Building 15.9 Higher Education 8.6 General Purpose 7.3
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 are a percentage of total investments. Top 5 sectors percentages are as a percentage of long-term investments. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Ratings allocations based upon ratings as issued by Standard & Poor's and Moody's, respectively. 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 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 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 (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 6 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 10/1/05 - 3/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. 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 * ------------------------------------------------- 10/1/05 3/31/06 10/1/05-3/31/06 Class A Actual..................................... $1,000.00 $1,009.77 $4.61 Hypothetical............................... 1,000.00 1,020.33 4.63 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,009.53 4.36 Hypothetical............................... 1,000.00 1,020.63 4.38 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,005.45 8.35 Hypothetical............................... 1,000.00 1,016.63 8.40 (5% annual return before expenses) Class I Actual..................................... 1,000.00 1,010.49 3.36 Hypothetical............................... 1,000.00 1,021.63 3.38 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.92%, 0.87% and 1.67% and 0.67% for Class A, B, C and I 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, 2006 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS 98.9% $1,925 Alhambra, CA City Elem Sch Dist Cap Apprec Ser A (FSA Insd) (a).................................. * 09/01/20 $ 991,144 2,000 Anaheim, CA Pub Fin Auth Tax Alloc Rev (Inverse Fltg) (MBIA Insd)............................... 9.420% 12/28/18 2,267,740 3,000 Baldy Mesa, CA Wtr Dist Ctf Partn Parity Wtr Sys Impt Proj (AMBAC Insd).......................... 5.000 08/01/36 3,121,440 1,430 Bay Area Govt Assn CA Lease Rev Cap Proj Ser A (AMBAC Insd) (a)................................ 5.250 07/01/17 1,520,133 2,735 Bay Area Govt Assn CA Lease West Sacramento Ser A (XLCA Insd) (a)............................... 5.000 09/01/29 2,832,749 1,070 Bonita, CA Uni Sch Dist Election 2004 Ser A (MBIA Insd)..................................... 5.250 08/01/24 1,147,778 1,000 Bonita, CA Uni Sch Dist Election 2004 Ser A (MBIA Insd)..................................... 5.000 08/01/28 1,041,780 1,730 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA Insd) (a)....................................... 5.500 08/01/17 1,880,026 1,850 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA Insd) (a)....................................... 5.500 08/01/18 2,010,432 455 Calexico, CA Cmnty Redev Agy Tax Alloc Merged Cent Bus & Residential Ser C (AMBAC Insd)....... 5.000 08/01/28 474,447 7,000 California Edl Fac Auth Rev Univ Of The Pacific (MBIA Insd)..................................... 5.875 11/01/20 7,641,760 2,000 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdg First Lien Ser A (FGIC Insd)..... 5.000 07/01/29 2,074,300 1,050 California Spl Dist Assn Fin Corp Ctf Partn Pgm Ser DD (FSA Insd) (a)........................... 5.625 01/01/27 1,084,230 1,150 California St (FGIC Insd)....................... 6.250 09/01/12 1,309,194 1,200 California St Dept Transn Ctf Ser A Rfdg (MBIA Insd)........................................... 5.250 03/01/16 1,240,056 2,500 California St Dept Wtr Res Pwr Supply Rev Rite Ser B (Inverse Fltg) (MBIA Insd) (Acquired 9/8/03, Cost $2,709,650) (a) (b)................ 6.769 05/01/11 2,988,900 2,500 California St Pub Wks Brd Lease Dept Corrections Ten Admin Ser A (AMBAC Insd).................... 5.250 03/01/17 2,665,825 7,750 California St Rfdg (FGIC Insd).................. 5.000 02/01/23 7,985,135 1,000 California St Univ Rev & Colleges Systemwide Ser A (AMBAC Insd).................................. 5.375 11/01/18 1,084,880 1,900 California Statewide Cmntys Dev Auth Wtr Rev Ser A (FSA Insd).................................... 5.000 10/01/26 1,987,514 1,000 Carson, CA Redev Agy Redev Proj Area No 1 Tax Alloc (MBIA Insd)............................... 5.500 10/01/15 1,114,660 2,000 Castaic Lake Wtr Agy CA Ctf Partn Wtr Sys Impt Proj Ser A Rfdg (MBIA Insd)..................... 7.000 08/01/12 2,352,560 3,000 Castaic Lake Wtr Agy CA Rev Ctf Partn Ser A (MBIA Insd)..................................... 5.250 08/01/23 3,182,760
8 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $ 100 Cerritos, CA Cmnty College Election 2004 Ser A (MBIA Insd)..................................... 5.000% 08/01/26 $ 104,248 125 Cerritos, CA Cmnty College Election 2004 Ser A (MBIA Insd)..................................... 5.000 08/01/28 130,222 2,000 Chula Vista, CA Pub Fin Auth Rev Ser A Rfdg (MBIA Insd)..................................... 5.000 09/01/29 2,075,220 1,160 Coachella, CA Fin Auth Tax Proj 1 & 2 Ser A Rfdg (XLCA Insd) (a)................................. 5.250 12/01/30 1,229,913 3,140 Colton, CA Jt Uni Sch Dist Election 2001 Ser C (FGIC Insd)..................................... 5.250 02/01/25 3,372,643 2,500 Colton, CA Jt Uni Sch Dist Election 2001 Ser C (FGIC Insd)..................................... 5.250 02/01/27 2,677,625 3,400 Contra Costa, CA Cmnty College Election 2002 (MBIA Insd)..................................... 5.000 08/01/29 3,542,052 2,500 Culver City, CA Redev Agy Tax Alloc Redev Proj Ser A Rfdg (AMBAC Insd)......................... 5.000 11/01/23 2,610,725 2,400 Dinuba, CA Redev Agy Tax Alloc Merged City Redev Proj No 2 Rfdg (AMBAC Insd)..................... 5.000 09/01/34 2,482,800 1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA Insd)........................................... 5.000 06/01/21 1,044,210 2,195 Elk Grove, CA Uni Sch Dist Spl Tax Cmnty Fac Dist No 1 (MBIA Insd)........................... 5.000 12/01/35 2,282,756 1,280 Fillmore, CA Uni Sch Dist Election 2004 Ser A (FSA Insd)...................................... 5.000 08/01/27 1,338,688 1,300 Folsom Cordova, CA Uni Sch Dist Sch Fac Impt Dist No 2 Ser A (MBIA Insd)..................... 5.375 10/01/17 1,408,979 1,360 Folsom, CA Pub Fin Auth City Hall & Cmnty Ctr Rfdg (FSA Insd) (a)............................. 5.000 10/01/16 1,438,350 1,480 Fontana, CA Redev Agy Tax Alloc Dwntwn Redev Proj Rfdg (MBIA Insd)........................... 5.000 09/01/21 1,532,777 650 Fresno, CA Jt Pwrs Fin Auth Ser A (FSA Insd).... 5.000 06/01/17 682,974 590 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/17 682,152 630 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/18 734,548 675 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/19 791,579 720 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd) (a)............................................. 5.900 08/01/20 849,478 1,000 Fullerton, CA Sch Dist 2002 Election Ser B (FSA Insd)........................................... 5.125 08/01/26 1,059,270 2,000 Glendale, CA Redev Agy Tax Ctr Glendale Redev Proj (MBIA Insd)................................ 5.250 12/01/20 2,137,860 2,425 Glendora, CA Pub Fin Auth Tax Alloc Proj No 1 Ser A (MBIA Insd)............................... 5.000 09/01/24 2,515,355 5,000 Golden St Tobacco Securitization Corp CA Tobacco Settlement Rev Enhanced Asset Bkd Ser A (FGIC Insd)........................................... 5.000 06/01/38 5,138,500 2,230 Hanford, CA High Sch Dist Election 1998 Ser C (MBIA Insd) (a)................................. 5.700 08/01/28 2,513,968
See Notes to Financial Statements 9 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $2,500 Huntington Beach, CA High Election 2004 (FSA Insd)...................................... 5.000% 08/01/26 $ 2,607,975 2,000 Imperial Irr Dist CA Ctf Partn Elec Sys Proj (FSA Insd)...................................... 5.250 11/01/23 2,127,760 1,950 Imperial Irr Dist CA Ctf Partn Wtr Sys Proj (AMBAC Insd) (a)................................ 5.000 07/01/19 2,044,614 2,000 Inglewood, CA Redev Agy Tax Alloc Merged Redev Proj Ser A Rfdg (AMBAC Insd).................... 5.250 05/01/23 2,205,380 1,715 Irvine, CA Pub Fac & Infrastructure Ser B (AMBAC Insd) (a)....................................... 5.000 09/02/23 1,774,991 2,000 La Canada, CA Uni Sch Dist Election 2004 Ser A (MBIA Insd)..................................... 5.500 08/01/28 2,186,240 2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.250 09/01/24 2,142,400 2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.000 09/01/29 2,080,000 2,000 La Quinta, CA Redev Agy Tax Alloc Redev Proj Area No 1 (AMBAC Insd).......................... 5.000 09/01/22 2,088,580 1,000 Livermore-Amador Vly Wtr Mgmt Agy CA Swr Rev Ser A (AMBAC Insd).................................. 5.250 08/01/16 1,069,150 1,000 Long Beach, CA Bd Fin Auth Lease Rev Rainbow Harbor Refin Proj Ser A (AMBAC Insd)............ 5.250 05/01/24 1,050,390 1,260 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac Proj (AMBAC Insd) (a)........................... 5.250 11/01/16 1,361,682 1,545 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac Proj (AMBAC Insd) (a)........................... 5.250 11/01/20 1,658,156 2,000 Long Beach, CA Cmnty College Dist 2002 Election Ser B (FGIC Insd)............................... 5.000 05/01/25 2,088,220 2,740 Los Angeles Cnty, CA Ctf Partn Antelope Vly Courthouse Ser A (AMBAC Insd)................... 5.750 11/01/16 2,968,954 1,000 Los Angeles Cnty, CA Ctf Partn Disney Pkg Proj Rfdg (AMBAC Insd)............................... 4.750 03/01/23 1,009,680 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 1,039,500 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 1,301,616 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 1,051,490 1,265 Los Angeles Cnty, CA Schs Regionalized Business Svcs Ctf Partn Cap Apprec Pooled Fin Ser A (AMBAC Insd).................................... * 08/01/24 528,859 1,975 Los Angeles, CA Ctf Partn Real Ppty Pgm Ser T (MBIA Insd) (a)................................. 5.000 02/01/19 2,048,114 2,000 Los Angeles, CA Dept Wtr & Pwr Sys Ser C (MBIA Insd)........................................... 5.000 07/01/26 2,078,620 2,380 Los Angeles, CA Mtg Rev FHA Security 8 Asstd Proj Ser A Rfdg (MBIA Insd)..................... 6.100 07/01/25 2,382,404
10 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $1,375 Los Angeles, CA Spl Assmt Landscaping & Ltg Dist No 96 Ser 1 (AMBAC Insd) (a).................... 5.000% 03/01/21 $ 1,422,217 1,000 Lynwood, CA Uni Sch Dist 2002 Election Ser A (FSA Insd)...................................... 5.000 08/01/27 1,037,520 1,000 Menifee, CA Uni Sch Dist 2002 Election Ser B (FGIC Insd)..................................... 5.000 08/01/28 1,043,520 1,500 Modesto, CA Irr Dist Ctfs Partn Cap Impts Ser A (FSA Insd)...................................... 5.250 07/01/18 1,602,120 1,105 Monrovia, CA Fin Auth Lease Rev Hillside Wilderness Preserve (AMBAC Insd)................ 5.000 12/01/20 1,159,996 2,000 Montclair, CA Redev Agy Tax Redev Proj No V Rfdg (MBIA Insd)..................................... 5.000 10/01/20 2,080,380 1,000 Mount Pleasant, CA Elem Sch Dist 1998 Election Ser C (FSA Insd)................................ 5.500 03/01/26 1,071,720 1,570 Mountain View, CA Shoreline Tax Alloc Ser A (MBIA Insd) (a)................................. 5.250 08/01/16 1,679,398 1,105 National City, CA Cmnty Dev Com Redev Proj Ser B Rfdg (AMBAC Insd)............................... 5.250 08/01/32 1,177,477 2,000 Natomas, CA Uni Sch Dist Rfdg (FGIC Insd)....... 5.250 09/01/16 2,112,120 2,060 Norco, CA Redev Agy Tax Alloc Norco Redev Proj Area No 1 Rfdg (AMBAC Insd)..................... 5.000 03/01/26 2,135,664 1,250 North City West, CA Sch Fac Fin Auth Spl Tax Ser B Rfdg (FSA Insd)............................... 5.750 09/01/15 1,285,750 1,000 Novato, CA Uni Sch Dist (FSA Insd).............. 5.000 08/01/28 1,041,780 3,915 Oak Grove, CA Sch Dist 1995 Election (FGIC Insd)........................................... 5.250 08/01/25 4,147,355 1,000 Oakland, CA Uni Sch Dist Alameda Cnty (FSA Insd)........................................... 5.000 08/01/17 1,034,530 1,300 Oceanside, CA Ctf Partn Ser A Rfdg (AMBAC Insd)........................................... 5.200 04/01/23 1,370,798 3,025 Orange Cnty, CA Pub Fin Auth Lease Rev Juvenile Justice Ctr Fac Rfdg (AMBAC Insd)............... 5.375 06/01/17 3,286,118 1,145 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd)..... 5.000 10/01/25 1,189,575 1,340 Palm Springs, CA Fin Lease Rev Convention Ctr Proj Ser A Rfdg (MBIA Insd)..................... 5.250 11/01/19 1,441,786 2,535 Placentia Yorba Linda, CA Uni Sch Dist Ctf Partn (FGIC Insd)..................................... 5.000 10/01/22 2,659,088 3,065 Placentia Yorba Linda, CA Uni Sch Dist Ctf Partn (FGIC Insd)..................................... 5.000 10/01/30 3,181,225 2,020 Pomona, CA Pub Fin Auth Rev Merged Redev Proj Ser AD (MBIA Insd) (a).......................... 5.000 02/01/15 2,123,363 1,110 Pomona, CA Pub Fin Auth Rev Merged Redev Proj Ser AD (MBIA Insd) (a).......................... 5.000 02/01/16 1,166,799 1,360 Port Hueneme, CA Ctf Partn Cap Impt Pgm Rfdg (MBIA Insd)..................................... 6.000 04/01/19 1,595,103 1,055 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj (AMBAC Insd) (a)................................ 5.375 06/15/20 1,137,480
See Notes to Financial Statements 11 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $3,000 Rancho Cucamonga, CA Redev Agy Rancho Redev Proj (MBIA Insd)..................................... 5.375% 09/01/25 $ 3,198,540 1,000 Redding, CA Elec Sys Rev Ctf Partn (Inverse Fltg) (Escrowed to Maturity) (MBIA Insd)........ 9.359 07/01/22 1,364,680 1,400 Redding, CA Redev Agy Tax Alloc Canby Hilltop Cypress Redev Ser A (MBIA Insd)................. 5.000 09/01/23 1,461,614 3,775 Riverside Cnty, CA Ctf Partn Historic Courthouse Proj (FGIC Insd) (a)............................ 5.000 11/01/27 3,918,979 2,160 Roseville, CA Jt Un High Sch Election 2004 Ser A (FGIC Insd) (a)................................. 5.000 08/01/26 2,251,757 1,000 Sacramento, CA City Fin Auth Rev Cap Impt (AMBAC Insd)........................................... 5.000 12/01/33 1,031,730 1,500 San Diego Cnty, CA Ctf Partn Edgemoor Proj & Regl Sys Rfdg (AMBAC Insd)...................... 5.000 02/01/23 1,562,415 2,000 San Francisco, CA City & Cnty Second Ser Issue 26B (FGIC Insd)................................. 5.000 05/01/22 2,077,800 2,675 San Jose, CA Fin Auth Lease Rev Convention Ctr Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,814,020 1,000 San Leandro, CA Ctf Partn Lib & Fire Stations Fin (AMBAC Insd)................................ 5.750 11/01/29 1,081,600 1,000 San Leandro, CA Jt Proj Area Fin (MBIA Insd).... 5.100 12/01/26 1,045,710 1,340 Sanger, CA Uni Sch Dist Ctfs Cap Impt Prog (FSA Insd) (a)....................................... 5.000 03/01/25 1,421,311 2,000 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc Ser A Rfdg (MBIA Insd) (a)...................... 5.375 09/01/20 2,137,280 2,065 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/21 2,202,839 2,450 Santa Monica, CA Cmnty College Ser A Rfdg (AMBAC Insd) (a)....................................... 5.250 02/01/23 2,610,794 1,000 Shasta, CA Jt Pwrs Fin Auth Cnty Admin Bldg Proj Ser A (MBIA Insd)............................... 5.250 04/01/22 1,060,930 1,000 South Gate, CA Pub Fin Auth South Gate Redev Proj No 1 (XLCA Insd)........................... 5.750 09/01/22 1,111,670 2,150 Temecula, CA Redev Agy Tax Alloc Rev Temecula Redev Proj No 1 (MBIA Insd)..................... 5.125 08/01/27 2,238,924 1,000 University of CA Rev Multi Purp Proj Ser M (FGIC Insd)........................................... 5.125 09/01/17 1,052,880 1,000 University of CA Rev Resh Fac Ser E (AMBAC Insd)........................................... 5.000 09/01/19 1,046,940 1,540 Vallejo City, CA Uni Sch Dist Ser A Rfdg (MBIA Insd)..................................... 5.900 02/01/20 1,809,808
12 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS (CONTINUED) $2,000 Ventura Cnty, CA Ctf Partn Pub Fin Auth Ser I (FSA Insd)...................................... 5.250% 08/15/16 $ 2,101,240 3,655 Woodland, CA Fin Auth Wastewater Rev Second Sr Lien (MBIA Insd) (a)............................ 5.000 03/01/30 3,791,953 ------------ TOTAL INVESTMENTS 98.9% (Cost $216,211,798)....................................................... 226,849,406 OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%................................. 2,546,747 ------------ NET ASSETS 100.0%.......................................................... $229,396,153 ============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) The Fund owns 100% of the outstanding bond issuance. (b) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 1.3% of net assets. AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 13 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2006 (Unaudited) ASSETS: Total Investments (Cost $216,211,798)....................... $226,849,406 Cash........................................................ 1,387,878 Receivables: Interest.................................................. 2,474,898 Fund Shares Sold.......................................... 121,121 Other....................................................... 147,975 ------------ Total Assets............................................ 230,981,278 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 880,683 Income Distributions...................................... 220,526 Investment Advisory Fee................................... 92,324 Distributor and Affiliates................................ 73,874 Trustees' Deferred Compensation and Retirement Plans........ 212,831 Accrued Expenses............................................ 104,887 ------------ Total Liabilities....................................... 1,585,125 ------------ NET ASSETS.................................................. $229,396,153 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $217,955,564 Net Unrealized Appreciation................................. 10,637,608 Accumulated Undistributed Net Investment Income............. 565,117 Accumulated Net Realized Gain............................... 237,864 ------------ NET ASSETS.................................................. $229,396,153 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $186,322,622 and 10,144,139 shares of beneficial interest issued and outstanding)............. $ 18.37 Maximum sales charge (4.75%* of offering price)......... .92 ------------ Maximum offering price to public........................ $ 19.29 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $29,493,222 and 1,581,140 shares of beneficial interest issued and outstanding)............. $ 18.65 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $11,420,309 and 621,542 shares of beneficial interest issued and outstanding)............. $ 18.37 ============ Class I Shares: Net asset value and offering price per share (Based on net assets of $2,160,000 and 117,623 shares of beneficial interest issued and outstanding)............. $ 18.36 ============
* On sales of $100,000 or more, the sales charge will be reduced. 14 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2006 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 5,534,050 ----------- EXPENSES: Investment Advisory Fee..................................... 548,226 Distribution (12b-1) and Service Fees (Attributed to Classes A, B, and C of $233,512, $31,548 and $58,961 respectively)............................................. 324,021 Shareholder Services........................................ 66,621 Legal....................................................... 26,156 Trustees' Fees and Related Expenses......................... 15,738 Custody..................................................... 12,107 Other....................................................... 111,414 ----------- Total Expenses.......................................... 1,104,283 Less Credits Earned on Cash Balances.................... 3,584 ----------- Net Expenses............................................ 1,100,699 ----------- NET INVESTMENT INCOME....................................... $ 4,433,351 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 294,696 Futures................................................... 2,991 ----------- Net Realized Gain........................................... 297,687 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 13,202,185 End of the Period......................................... 10,637,608 ----------- Net Unrealized Depreciation During the Period............... (2,564,577) ----------- NET REALIZED AND UNREALIZED LOSS............................ $(2,266,890) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 2,166,461 ===========
See Notes to Financial Statements 15 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, 2006 SEPTEMBER 30, 2005 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 4,433,351 $ 9,071,213 Net Realized Gain.................................... 297,687 2,956,456 Net Unrealized Depreciation During the Period........ (2,564,577) (2,833,739) ------------ ------------ Change in Net Assets from Operations................. 2,166,461 9,193,930 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (3,747,886) (7,367,133) Class B Shares..................................... (604,450) (1,193,998) Class C Shares..................................... (192,493) (381,330) Class I Shares..................................... (51,060) (14,214) ------------ ------------ (4,595,889) (8,956,675) ------------ ------------ Distributions from Net Realized Gain: Class A Shares..................................... (2,396,767) (1,194,255) Class B Shares..................................... (396,499) (256,541) Class C Shares..................................... (152,451) (76,525) Class I Shares..................................... (31,914) -0- ------------ ------------ (2,977,631) (1,527,321) ------------ ------------ Total Distributions.................................. (7,573,520) (10,483,996) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... (5,407,059) (1,290,066) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 18,106,453 34,454,209 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 5,468,461 7,391,256 Cost of Shares Repurchased........................... (25,140,936) (40,845,600) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (1,566,022) 999,865 ------------ ------------ TOTAL DECREASE IN NET ASSETS......................... (6,973,081) (290,201) NET ASSETS: Beginning of the Period.............................. 236,369,234 236,659,435 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $565,117 and $727,655, respectively)............................ $229,396,153 $236,369,234 ============ ============
16 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, CLASS A SHARES MARCH 31, ----------------------------------------------- 2006 2005 2004 2003 2002 (b) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $18.80 $18.93 $18.84 $19.45 $18.64 $17.67 ------ ------ ------ ------ ------ ------ Net Investment Income........... .36(c) .72 .75 .74 .77 .81 Net Realized and Unrealized Gain/Loss..................... (.18) .01 .06 (.44) .85 .94 ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .18 .73 .81 .30 1.62 1.75 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............. .37 .74 .72 .75 .78 .78 Distributions from Net Realized Gain.......................... .24 .12 -0- .16 .03 -0- ------ ------ ------ ------ ------ ------ Total Distributions............... .61 .86 .72 .91 .81 .78 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $18.37 $18.80 $18.93 $18.84 $19.45 $18.64 ====== ====== ====== ====== ====== ====== Total Return (a).................. 0.98%* 3.96% 4.42% 1.67% 9.01% 10.09% Net Assets at End of the Period (In millions)................... $186.3 $188.0 $183.0 $195.4 $200.4 $174.9 Ratio of Expenses to Average Net Assets.......................... .92% .92% .89% .87% .87% .89% Ratio of Net Investment Income to Average Net Assets.............. 3.84% 3.83% 4.00% 3.93% 4.18% 4.43% Portfolio Turnover................ 17%* 25% 16% 25% 32% 39%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (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 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. (c) Based on average shares outstanding. See Notes to Financial Statements 17 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, ----------------------------------------------- 2006 2005 2004 2003 2002 (b) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $19.07 $19.03 $18.82 $19.44 $18.65 $17.69 ------ ------ ------ ------ ------ ------ Net Investment Income........... .37(d) .79 .72 .60 .63 .67 Net Realized and Unrealized Gain/Loss..................... (.22) (.03) .07 (.45) .84 .94 ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .18 .76 .79 .15 1.47 1.61 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............. .36 .60 .58 .61 .65 .65 Distributions from Net Realized Gain.......................... .24 .12 -0- .16 .03 -0- ------ ------ ------ ------ ------ ------ Total Distributions............... .60 .72 .58 .77 .68 .65 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $18.65 $19.07 $19.03 $18.82 $19.44 $18.65 ====== ====== ====== ====== ====== ====== Total Return (a).................. 0.95%*(c) 4.10%(c) 4.29%(c) 0.87% 8.16% 9.27% Net Assets at End of the Period (In millions)................... $ 29.5 $ 33.7 $ 41.1 $ 49.8 $ 53.0 $ 47.7 Ratio of Expenses to Average Net Assets.......................... .87%(c) .81%(c) 1.09%(c) 1.62% 1.63% 1.65% Ratio of Net Investment Income to Average Net Assets.............. 3.89%(c) 3.96%(c) 3.80%(c) 3.18% 3.42% 3.67% Portfolio Turnover................ 17%* 25% 16% 25% 32% 39%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within the first and second years of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on the Fund distributions or the redemption of Fund shares. (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 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. (c) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See footnote 7). (d) Based on average shares outstanding. 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 C SHARES MARCH 31, ----------------------------------------------- 2006 2005 2004 2003 2002 (b) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.......................... $18.81 $18.93 $18.82 $19.43 $18.64 $17.68 ------ ------ ------ ------ ------ ------ Net Investment Income........... .29(e) .59 .61 .61 .64 .68 Net Realized and Unrealized Gain/Loss..................... (.18) .01 .08 (.45) .83 .93 ------ ------ ------ ------ ------ ------ Total from Investment Operations...................... .10 .60 .69 .16 1.47 1.61 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............. .30 .60 .58 .61 .65 .65 Distributions from Net Realized Gain.......................... .24 .12 -0- .16 .03 -0- ------ ------ ------ ------ ------ ------ Total Distributions............... .54 .72 .58 .77 .68 .65 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......................... $18.37 $18.81 $18.93 $18.82 $19.43 $18.64 ====== ====== ====== ====== ====== ====== Total Return (a).................. 0.54%* 3.26%(d) 3.75%(d) 0.92%(c) 8.16% 9.27% Net Assets at End of the Period (In millions)................... $ 11.4 $ 12.0 $ 12.6 $ 18.1 $ 15.0 $ 11.0 Ratio of Expenses to Average Net Assets.......................... 1.67% 1.61%(d) 1.59%(d) 1.62% 1.63% 1.65% Ratio of Net Investment Income to Average Net Assets.............. 3.09% 3.15%(d) 3.30%(d) 3.20%(c) 3.41% 3.67% Portfolio Turnover................ 17%* 25% 16% 25% 32% 39%
* 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 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. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .03%. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See footnote 7). (e) Based on average shares outstanding. 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.
AUGUST 12, 2005 SIX MONTHS (COMMENCEMENT CLASS I SHARES ENDED OF OPERATIONS) TO MARCH 31, 2006 SEPTEMBER 30, 2005 ------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD................ $18.80 $18.87 ------ ------ Net Investment Income................................. .38(b) .09 Net Realized and Unrealized Loss...................... (.18) (.06) ------ ------ Total from Investment Operations........................ .20 .03 ------ ------ Less: Distributions from Net Investment Income.............. .40 .10 Distributions from Net Realized Gain.................. .24 -0- ------ ------ Total Distributions..................................... .64 .10 ------ ------ NET ASSET VALUE, END OF THE PERIOD...................... $18.36 $18.80 ====== ====== Total Return (a)........................................ 1.05%* 0.17%* Net Assets at End of the Period (In millions)........... $ 2.2 $ 2.6 Ratio of Expenses to Average Net Assets................. .67% .73% Ratio of Net Investment Income to Average Net Assets.... 4.08% 4.03% Portfolio Turnover...................................... 17%* 25%
* Non-Annualized (a) Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund Shares. (b) Based on average shares outstanding. 20 See Notes to Financial Statements VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class specific expenses and voting rights on matters affecting a single class. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. 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, 2006, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. 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, 2006 (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, 2006, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $216,032,197 ============ Gross tax unrealized appreciation........................... $ 10,998,819 Gross tax unrealized depreciation........................... (181,610) ------------ Net tax unrealized appreciation on investments.............. $ 10,817,209 ============
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, 2005 was as follows: Distributions paid from: Ordinary income........................................... $ 755 Long-term capital gain.................................... 1,527,321 ---------- $1,528,076 ==========
As of September 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 94,762 Undistributed long-term capital gain........................ 2,815,951
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, 2006, the Fund's custody fee was reduced by $3,584 as a result of credits earned on cash balances. 22 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, the Adviser will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $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, 2006, the Fund recognized expenses of approximately $4,300 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 legal services as legal counsel to the Fund. Under separate Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment agreements, the Adviser provides accounting and legal services and the CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $35,900 representing Van Kampen Investment Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $52,300 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 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 $123,676 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2006. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. For the six months ended March 31, 2006, Van Kampen as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $45,300 and 23 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued CDSC on redeemed shares of approximately $9,600. Sales charges do not represent expenses of the Fund. 3. CAPITAL TRANSACTIONS For the six months ended March 31, 2006 and the year ended September 30, 2005, transactions were as follows:
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2006 SEPTEMBER 30, 2005 -------------------------- -------------------------- SHARES VALUE SHARES VALUE Sales: Class A........................... 891,888 $ 16,562,414 1,471,767 $ 27,872,464 Class B........................... 23,574 444,818 83,294 1,597,761 Class C........................... 55,667 1,037,500 118,736 2,246,315 Class I........................... 3,326 61,721 145,079 2,737,669 ---------- ------------ ---------- ------------ Total Sales......................... 974,455 $ 18,106,453 1,818,876 $ 34,454,209 ========== ============ ========== ============ Dividend Reinvestment: Class A........................... 239,769 $ 4,445,119 320,900 $ 6,072,157 Class B........................... 38,635 727,065 53,489 1,021,670 Class C........................... 11,501 213,306 14,962 283,212 Class I........................... 4,475 82,971 753 14,217 ---------- ------------ ---------- ------------ Total Dividend Reinvestment......... 294,380 $ 5,468,461 390,104 $ 7,391,256 ========== ============ ========== ============ Repurchases: Class A........................... (986,567) $(18,335,584) (1,459,363) $(27,608,932) Class B........................... (246,696) (4,657,194) (528,905) (10,111,922) Class C........................... (85,423) (1,588,325) (158,990) (3,012,985) Class I........................... (30,105) (559,833) (5,905) (111,761) ---------- ------------ ---------- ------------ Total Repurchases................... (1,348,791) $(25,140,936) (2,153,163) $(40,845,600) ========== ============ ========== ============
4. REDEMPTION FEE The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within seven days of purchase. The redemption fee is paid directly to the Fund. For the six months ended March 31, 2006, the Fund did not receive any redemption fees. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $38,189,287 and $41,747,794, respectively. 6. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund 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 24 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in futures on U.S. Treasury Notes and typically closes the contract prior to the delivery date. The contracts are generally used to manage the portfolio's effective maturity and duration. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). Transactions in futures contracts for the six months ended March 31, 2006, were as follows:
CONTRACTS Outstanding at September 30, 2005........................... -0- Futures Opened.............................................. 107 Futures Closed.............................................. (107) ---- Outstanding at March 31, 2006............................... -0- ====
B. INDEXED SECURITIES The Fund invests in indexed securities. These instruments are identified in the Portfolio of Investments. The price of these securities may be more volatile than the price of a comparable fixed rate security. An inverse floating rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. These instruments are typically used by the Fund to enhance the yield of the portfolio. 7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate the Distributor for the distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. 25 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $0 and $3,500 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. 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 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. Plaintiffs filed a Motion for Leave to file a Supplemental Pleading that would, among other things, expand the allegations and alleged class. The defendants moved to dismiss this action, which motion was granted in its entirety. Additionally, plaintiffs' Motion for Leave to file a Supplemental Pleading was denied. The matter is now concluded. 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 sought leave to file a second amended derivative complaint 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. Additionally, plaintiff's initial complaint regarding allegations of economic incentives was stayed pending certain procedural developments. 26 VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. Defendants' motion to dismiss in the market timing litigation was granted in part and denied in part, and defendants filed a motion for reconsideration of the Court's decision to uphold certain of plaintiff's claims. Additionally, plaintiff and the named Trustees entered into a tolling agreement. The tolling agreement dismisses the Trustees from the action without prejudice in exchange for tolling all claims against the Trustees. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 9. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 27 VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer J. DAVID GERMANY Vice President DENNIS SHEA Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer PHILLIP G. GOFF Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 28 Van Kampen California Insured Tax Free Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen California Insured Tax Free Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen California Insured Tax Free Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 41, 341, 541 CAI SAR 5/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-0125P-Y03/06 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, 2006. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B AND C SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN A CLASS I SHARE PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/06
A SHARES B SHARES C SHARES I SHARES since 8/1/90 since 8/24/92 since 8/13/93 since 8/12/05 - ---------------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES Since Inception 5.91% 5.58% 4.72% 4.72% 3.97% 3.97% 2.14% 10-year 4.83 4.33 4.35 4.35 4.03 4.03 -- 5-year 4.86 3.85 4.06 3.80 4.07 4.07 -- 1-year 4.65 -0.34 3.75 -0.25 3.82 2.82 -- 6-month 1.48 -3.32 0.97 -3.00 1.04 0.04 1.53 - ---------------------------------------------------------------------------------------------------- 30-Day SEC Yield 3.48% 2.91% 2.91% 3.91%
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. Class I shares are available for purchase exclusively by investors through (i) tax-exempt retirement plans with assets of at least $1 million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase plans, defined benefit plans and non-qualified deferred compensation plans), (ii) fee-based investment programs with assets of at least $1 million and (iii) institutional clients with assets of at least $1 million. Class I shares are offered without any sales charges on purchases or sales and do not include combined Rule 12b-1 fees and service fees. Figures shown above assume reinvestment of all dividends and capital gains. SEC yield is a calculation for 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 SIX-MONTH PERIOD ENDED MARCH 31, 2006 MARKET CONDITIONS Despite the shadow of rising oil prices, the devastation of the Gulf Coast hurricanes, and emerging weakness in the housing market, the economy continued to grow during the six-month period ended March 31, 2006. This expansion was more modest in the fourth quarter of 2005, but gained momentum in the first quarter of 2006. Against the backdrop of growth and good employment data, the Federal Open Market Committee (the "Fed") continued raising the federal funds target rate during the period, implementing four additional increases of 25 basis points each. The final hike of the period represented the fifteenth consecutive increase--the longest stretch of increases in 25 years. As the period came to a close, market observers speculated about the Fed's near-term intentions, given the central bank's view that although longer-term inflation appeared contained, commodity prices could amplify inflationary pressures. Returns across the municipal bond market varied significantly. As investors sought income opportunities, lower rated bonds outpaced investment-grade bonds by a wide margin. Long-term bonds earned the best returns, broadly speaking, while bonds in the three-to-seven year range posted the most muted gains. Municipal bond issuance was robust during the final months of 2005. (In fact, 2005 marked a record high for municipal bond volume.) The tide changed in the first quarter of 2006, however. As rising rates discouraged issuers from refinancing debt, national municipal issuance dropped by 30 percent versus the same period a year ago. While supply ebbed, the market's appetite for municipal bonds remained strong, with particularly heavy demand from high yield municipal bond funds. 2 PERFORMANCE ANALYSIS The fund returned 1.48 percent for the six months ended March 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 0.98 percent for the period. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006
- ----------------------------------------------------------------------------- LEHMAN BROTHERS MUNICIPAL CLASS A CLASS B CLASS C CLASS I BOND INDEX 1.48% 0.97% 1.04% 1.53% 0.98% - -----------------------------------------------------------------------------
The performance for the four share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and index definition. We sought to increase the yield and return potential of the portfolio within the framework of our investment strategy. Following our long-standing "relative value" discipline, we favored high quality bonds with good liquidity. (Liquid securities are those for which there is a robust market of purchasers and sellers.) Based on our in-depth proprietary research, we purchased bonds we believed to be attractively valued, and then sold them when they reached our return targets. We then invested the proceeds into bonds which we believed offered greater future total return prospects. Several factors drove the fund's performance during the period. While the majority of the portfolio was invested in bonds rated AA and higher, the fund was overweighted in BBB rated bonds and non-rated bonds relative to its benchmark. In an environment of relatively low interest rates, demand for higher-yielding credits remained strong. Our analysis had suggested that interest rates would continue to rise, with the yields of short-term bonds advancing more rapidly than those of long-term issues. Accordingly, we kept the fund's duration (a measure of interest rate sensitivity) shorter than that of the Lehman benchmark, and this strategy contributed to the fund's relative performance. An overweighted position in long-term bonds -- the strongest segment of the market--also served the fund well. Our sales included shorter maturity, pre-refunded bonds. We also sold zero- coupon bonds, which tend to underperform during periods of rising rates. We added slightly to the fund's stake in BBB rated bonds during the period, bringing the fund's allocation of BBB and non-rated bonds to approximately 20 percent at the close of the reporting period. 3 The fund remained well diversified across the major sectors of the municipal market, with a focus on essential services. As of the close of the period, general purpose, hospitals and wholesale electric represented the fund's largest sector weightings. Meanwhile, approximately 72 percent of the fund's bonds were rated AA or higher as of March 31, 2006. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. 4
RATINGS ALLOCATION AS OF 3/31/06 AAA/Aaa 59.4% AA/Aa 13.0 A/A 6.0 BBB/Baa 9.3 BB/Ba 0.3 B/B 1.0 NR 11.0 TOP FIVE SECTORS AS A 3/31/06 General Purpose 14.8% Hospital 10.2 Wholesale Electric 10.1 Public Education 9.1 Bridge Tunnel 8.2 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/06 California 15.6% New York 15.0 Texas 12.1 Illinois 6.9 Colorado 6.2 New Jersey 6.1 Florida 5.5 Michigan 4.0 Massachusetts 2.1 Utah 2.1 Arizona 2.0 Connecticut 1.9 North Carolina 1.8 Missouri 1.5 Indiana 1.4 Georgia 1.4 Washington 1.4 District of Columbia 1.3 Kansas 1.1 Pennsylvania 1.1 Oregon 1.0 Iowa 1.0 Tennessee 0.9 West Virginia 0.9 New Hampshire 0.8 Louisiana 0.7 Ohio 0.5 Rhode Island 0.5 Alabama 0.5 Oklahoma 0.4 South Dakota 0.4 Minnesota 0.3 Maryland 0.2 Vermont 0.2
(continued on next page)
5
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/06 (continued from previous page) South Carolina 0.1 Taxable Note 0.3 ----- Total Investments 99.2% Other Assets in Excess of Liabilities 0.8 ----- 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. 6 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters 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 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 7 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 8 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales 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 10/1/05 - 3/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. 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* ------------------------------------------------- 10/1/05 3/31/06 10/1/05-3/31/06 Class A Actual..................................... $1,000.00 $1,014.79 $4.47 Hypothetical............................... 1,000.00 1,020.43 4.48 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,009.67 8.22 Hypothetical............................... 1,000.00 1,016.73 8.25 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,010.36 8.22 Hypothetical............................... 1,000.00 1,016.73 8.25 (5% annual return before expenses) Class I Actual..................................... 1,000.00 1,015.35 3.22 Hypothetical............................... 1,000.00 1,021.73 3.23 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.89%, 1.64%, 1.64% and 0.64% for Class A, B, C and I Shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 9 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MUNICIPAL BONDS 98.7% ALABAMA 0.5% $ 2,000 Birmingham Baptist Med Ctr AL Spl Care Fac Fin Auth Rev Baptist Hlth Sys Inc Ser A..... 5.000% 11/15/30 $ 1,976,160 1,000 Jefferson Cnty, AL Ltd Oblig Sch Wt Ser A... 5.000 01/01/24 1,028,390 3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev Mobile Energy Svc Co Proj Rfdg.............. 6.950 01/01/20 294 ------------ 3,004,844 ------------ ARIZONA 2.0% 1,000 Cottonwood, AZ Wtr Rev Sys Sr Lien (XLCA Insd)....................................... 5.000 07/01/30 1,041,040 5,000 Phoenix, AZ Civic Impt Corp Sr Lien Ser B (AMT) (FGIC Insd)........................... 5.250 07/01/32 5,164,850 1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)................ 6.000 09/01/12 1,969,200 1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp Ser A Rfdg (AMBAC Insd)................ 6.125 09/01/17 1,839,582 2,750 University Med Ctr Corp AZ Hosp Rev......... 5.000 07/01/35 2,753,410 ------------ 12,768,082 ------------ CALIFORNIA 15.6% 4,870 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec Sub Pub Impt Proj C (FSA Insd)....... * 09/01/20 2,507,466 2,000 California Cnty, CA Tob Securitization Agy Tob LA Cnty Securitization Ser A (a)........ 0/5.250 06/01/21 1,570,360 1,670 California Cnty, CA Tob Securitization Agy Tob Sonoma Cnty Corp Rfdg................... 5.000 06/01/26 1,629,486 1,875 California Cnty, CA Tob Securitization Agy Tob Sonoma Cnty Corp Rfdg................... 5.250 06/01/45 1,845,750 1,000 California Hlth Fac Fin Auth Rev Cedars Sinai Med Ctr Rfdg.......................... 5.000 11/15/27 1,017,920 3,000 California Hlth Fac Fin Auth Rev Cedars Sinai Med Ctr Rfdg.......................... 5.000 11/15/34 3,044,490 305 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien A (FSA Insd)....................................... 5.250 07/01/20 328,351 5,000 California Infrastructure & Econ Dev Bk Rev Rites-PA-1202R (Inverse Fltg) (Acquired 09/10/03, Cost $5,484,100) (FSA Insd) (b) (c)......................................... 6.519 07/01/11 5,765,550 5,725 California St (FSA Insd).................... 5.000 02/01/29 5,928,924 10,000 California St Dept Wtr Res Pwr Ser A (Prerefunded @ 05/01/12) (AMBAC Insd)....... 5.500 05/01/16 11,045,300 5,000 California St Dept Wtr Res Pwr Ser A (Prerefunded @ 05/01/12) (XLCA Insd)........ 5.375 05/01/17 5,488,900 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) (c)......................................... 6.519 05/01/20 7,771,979
10 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $ 7,500 California St Drivers Ser 482 (Inverse Fltg) (Acquired 07/19/04, Cost $8,325,750) (XLCA Insd) (b) (c)............................... 7.010% 10/01/10 $ 8,595,000 3,500 California St Pub Wks Brd Lease Rev Dept Corrections Ser C........................... 5.250 06/01/28 3,660,300 1,350 California Statewide Cmnty Dev Auth Rev Daughters of Charity Hlth Ser A............. 5.000 07/01/39 1,344,249 3,000 California Statewide Cmnty Dev Auth Rev Hlth Fac Adventist Hlth Ser A.................... 5.000 03/01/35 3,033,210 2,640 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC Insd)................................ * 09/01/13 1,671,674 5,430 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC Insd)................................ * 09/01/14 3,211,302 3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd)................. * 01/15/17 1,760,160 21,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg............................. * 01/15/24 7,644,210 15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg............................. * 01/15/30 3,793,050 2,400 Golden St Tob Securitization Corp CA Tob Settlement Rev Enhanced Ser A............... 5.000 06/01/45 2,441,328 6,695 San Francisco, CA City & Cnty Second Ser Issue 29 B Rfdg (FGIC Insd)................. 5.125 05/01/20 7,039,391 1,600 Turlock, CA Hlth Fac Rev Ctf Partn Emanuel Med Ctr Inc................................. 5.375 10/15/34 1,642,928 5,000 West Contra Costa CA Uni Election of 2002 Ser B (FSA Insd)............................ 5.000 08/01/26 5,167,050 ------------ 98,948,328 ------------ COLORADO 6.2% 2,840 Adams Cnty, CO Single Family Mtg Rev Ser A (Escrowed to Maturity) (b).................. 8.875 08/01/10 3,399,452 5,000 Arapahoe Cnty, CO Wtr & Waste Proj Ser A (MBIA Insd)................................. 5.125 12/01/32 5,225,400 5,000 Colorado Ed & Cultural Fac Auth Rev Impt Charter Sch Peak to Peak Rfdg (XLCA Insd)... 5.250 08/15/34 5,282,150 3,000 Colorado Hlth Fac Auth Rev Covenant Retirement Cmntys Inc....................... 5.000 12/01/35 2,947,410 1,000 Colorado Hlth Fac Auth Rev Evangelical Lutheran Ser A.............................. 5.250 06/01/34 1,019,410 5,000 Colorado Springs, CO Util Rev Sys Sub Lien Impt Ser A Rfdg............................. 5.000 11/15/21 5,214,500 5,000 Colorado Springs, CO Util Rev Sys Sub Lien Impt Ser A Rfdg............................. 5.000 11/15/29 5,128,950 1,630 Dove Vly Metro Dist CO Arapahoe Cnty Rfdg (FSA Insd).................................. 5.000 11/01/25 1,703,790
See Notes to Financial Statements 11 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- COLORADO (CONTINUED) $15,000 E 470 Pub Hwy Auth CO Rev Cap Apprec Sr Ser B (MBIA Insd)............................... * 09/01/20 $ 7,735,200 1,500 Park Creek Metro Dist CO Rev Sr Ltd Tax Ppty Tax Rfdg.................................... 5.500% 12/01/37 1,543,110 ------------ 39,199,372 ------------ 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)......................... 7.469 08/15/15 3,226,757 2,950 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg) (Acquired 07/09/02, Cost $3,323,232) (FGIC Insd) (b) (c)......................... 7.469 08/15/16 3,407,574 2,530 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A--Private Placement (d).......... 6.400 09/01/11 2,603,117 2,470 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A--Private Placement (Prerefunded @ 09/01/07) (d)............................. 6.400 09/01/11 2,590,017 ------------ 11,827,465 ------------ DISTRICT OF COLUMBIA 1.3% 5,150 District Columbia Tax Incrmnt Gallary Place Proj (FSA Insd)............................. 5.250 07/01/27 5,436,958 3,000 Metropolitan Washington DC Arpt Auth Sys Ser A (AMT) (FGIC Insd)......................... 5.250 10/01/32 3,100,830 ------------ 8,537,788 ------------ FLORIDA 5.3% 5,000 Broward Cnty, FL Arpt Sys Rev Ser J-I (AMT) (AMBAC Insd)................................ 5.250 10/01/26 5,182,250 1,100 Capital Tr Agy FL Rev Ft Lauderdale Proj (AMT)....................................... 5.750 01/01/32 1,143,571 9,000 Dade Cnty, FL Gtd Entitlement Rev Cap Apprec Ser A Rfdg (MBIA Insd)...................... * 02/01/18 4,525,200 570 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)....................................... 5.950 07/01/20 600,193 6,385 Lake Cnty, FL Sch Brd Ctf Partn (Prerefunded @ 07/01/12) (AMBAC Insd).................... 5.375 07/01/16 6,930,151 500 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg (Prerefunded @ 07/01/06)................................... 8.625 07/01/20 521,095 595 Orange Cnty, FL Tourist Dev Tax Rev (Escrowed to Maturity) (AMBAC Insd)......... 6.000 10/01/16 598,665 12,860 Orlando, FL Util Commn Wtr Rfdg............. 5.250 10/01/19 13,771,131 ------------ 33,272,256 ------------
12 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- GEORGIA 1.4% $ 2,000 Atlanta, GA Tax Alloc Eastside Proj Ser B... 5.600% 01/01/30 $ 2,053,100 6,310 Municipal Elec Auth GA Combustion Turbine Ser A (MBIA Insd)........................... 5.250 11/01/17 6,762,364 5 Municipal Elec Auth GA Combustion Turbine Ser A (Prerefunded @ 11/01/12) (MBIA Insd)....................................... 5.250 11/01/17 5,407 ------------ 8,820,871 ------------ ILLINOIS 6.9% 1,500 Bolingbrook, IL Sales Tax Rev (a)........... 0/6.250 01/01/24 1,345,260 3,000 Chicago, IL Lakefront Millennium Pkg Fac (MBIA Insd) (a)............................. 0/5.650 01/01/19 3,244,920 1,000 Chicago, IL Metro Wtr Reclamation Dist Gtr Chicago (Escrowed to Maturity).............. 7.000 01/01/11 1,105,310 8,050 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien C-2 Rfdg (AMT) (XLCA Insd)....... 5.250 01/01/34 8,299,952 1,200 Chicago, IL Proj & Rfdg Ser C (FGIC Insd) (b)......................................... 5.750 01/01/16 1,298,976 2,010 Chicago, IL Proj & Rfdg Ser C (Prerefunded @ 07/01/10) (FGIC Insd) (b)................... 5.750 01/01/16 2,188,990 40 Chicago, IL Single Family Mtg Rev Ser A (AMT) (GNMA Collateralized)................. 7.000 09/01/27 40,133 945 Chicago, IL Tax Increment Alloc Santn Drain & Ship Canal Ser A.......................... 7.750 01/01/14 985,975 1,000 Cook Cnty, IL Cmnty College Dist No 508 Chicago Ctf Partn (FGIC Insd)............... 8.750 01/01/07 1,036,960 5,000 Cook Cnty, IL Ser A (Prerefunded @ 05/15/11) (FGIC Insd)................................. 5.500 11/15/31 5,410,150 1,250 Huntley, IL Increment Alloc Rev Huntley Redev Proj Ser A............................ 8.500 12/01/15 1,284,925 90 Illinois Dev Fin Auth Rev Cmnty Fac Clinic Altgeld Proj................................ 8.000 11/15/06 89,000 5,000 Illinois St First Ser (FSA Insd)............ 5.250 12/01/21 5,332,750 9,250 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec McCormick Rfdg (MBIA Insd) (a)................................... 0/5.400 06/15/19 7,270,222 3,607 Pingree Grove Vlg, IL Spl Svc Area No 1 Spl Tax Ser 05-1 Cambridge Lakes Proj........... 5.250 03/01/15 3,654,252 1,000 Yorkville, IL Utd City Spl Svc Area Spl Tax No 2004-107 Raintree Vlg II Proj............ 6.250 03/01/35 1,026,200 ------------ 43,613,975 ------------ 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 2,602,125 1,890 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj Ser A.................................. 7.125 06/01/34 1,817,783 550 Indianapolis, IN Loc Pub Impt Bd Bk Ser D... 6.750 02/01/14 629,761
See Notes to Financial Statements 13 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- INDIANA (CONTINUED) $ 140 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/11 $ 94,198 140 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/12 87,259 135 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/13 77,958 130 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/14 69,553 130 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/15 64,428 135 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/16 61,988 225 Saint Joseph Cnty, IN Redev Dist Tax Increment Rev Ser B (b)..................... * 06/30/17 95,704 3,295 Vigo Cnty, IN Elem Sch Bldg First Mtg Impt & Rfdg (FSA Insd)............................. 5.250% 01/10/22 3,476,060 ------------ 9,076,817 ------------ IOWA 1.0% 175 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)............................. 6.000 07/01/07 178,160 2,400 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp Proj (FSA Insd)............................. 5.750 07/01/17 2,499,384 1,000 Tobacco Settlement Auth IA Tob Settlement Rev Ser C................................... 5.375 06/01/38 1,004,950 2,500 Tobacco Settlement Auth IA Tob Settlement Rev Ser C................................... 5.625 06/01/46 2,555,450 ------------ 6,237,944 ------------ KANSAS 1.1% 6,600 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd) (b)..................... 5.625 09/01/13 7,079,160 ------------ LOUISIANA 0.7% 4,350 Ernest N Morial New Orleans, LA Exhib Hall Auth Spl Tax Sub Ser A (AMBAC Insd)......... 5.000 07/15/33 4,420,035 ------------ MARYLAND 0.2% 1,250 Prince Georges Cnty, MD Spl Oblig Natl Harbor Proj................................. 5.200 07/01/34 1,260,400 ------------ MASSACHUSETTS 2.1% 3,500 Massachusetts St Hlth & Ed Fac Auth Rev Ser G (MBIA Insd)............................... 5.000 07/01/13 3,510,220 2,000 Massachusetts St Hlth & Ed Fac Auth Rev Univ MA Mem Issue Ser D.......................... 5.000 07/01/33 1,986,600
14 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $ 2,740 Massachusetts St Indl Fin Agy Rev First Mtg Reeds Landing Proj (a)...................... 7.350/7.450% 10/01/28 $ 2,647,662 5,000 Massachusetts St Rites PA 1290--Private Placement (Inverse Fltg) (Acquired 03/23/05, Cost $5,458,000) (FSA Insd) (b) (c)......... 6.076 03/01/24 5,457,000 ------------ 13,601,482 ------------ MICHIGAN 4.0% 825 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $825,000) (c)......................................... 6.850 05/01/21 845,460 5,000 Detroit, MI Sew Disp Rev Sr Lien Ser A Rfdg (FGIC Insd)................................. 5.125 07/01/31 5,203,350 5,000 Michigan St Bldg Auth Rev Fac Pgm Ser II (Prerefunded @ 10/15/11).................... 5.500 10/15/16 5,432,050 5,000 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (AMT) (XLCA Insd)............... 5.450 12/15/32 5,258,950 9,739 Michigan St Strategic Fd Ltd Oblig Rev Great Lakes Pulp & Fiber Proj (AMT) (e) (f)....... 8.000 12/01/27 1,364,114 1,905 Michigan St Strategic Fd Solid Genesee Pwr Sta Proj Rfdg (AMT)......................... 7.500 01/01/21 1,880,978 5,000 Western Townships, MI Util Sew Rfdg (MBIA Insd)....................................... 5.250 01/01/16 5,255,350 ------------ 25,240,252 ------------ MINNESOTA 0.3% 2,000 Saint Paul, MN Hsg & Redev Auth Hosp Rev Hltheast Proj............................... 6.000 11/15/35 2,147,360 ------------ MISSOURI 1.5% 1,000 Carthage, MO Hosp Rev....................... 5.750 04/01/22 1,002,260 1,000 Carthage, MO Hosp Rev....................... 5.875 04/01/30 1,004,880 3,000 Kansas City, MO Indl Dev Auth Plaza Lib Proj........................................ 6.000 03/01/16 3,115,530 2,835 Kansas City, MO Port Auth Fac Riverfront Park Proj Ser A (b)......................... 5.750 10/01/06 2,839,621 1,200 Missouri St Hlth & Ed Fac Auth Rev Sr Living Fac Lutheran Ser B Rfdg..................... 5.125 02/01/27 1,211,916 460 Saint Louis, MO Tax Increment Rev Scullin Redev Area Ser A............................ 10.000 08/01/10 508,700 ------------ 9,682,907 ------------ NEW HAMPSHIRE 0.8% 1,295 New Hampshire Higher Ed & Hlth Fac Auth Rev (b)......................................... 8.800 06/01/09 1,427,608 625 New Hampshire Higher Ed & Hlth Fac Auth Rev Daniel Webster College Issue Rfdg (b)....... 6.100 07/01/09 630,981 700 New Hampshire St Business Fin Auth Elec Fac Rev Plymouth Cogeneration (AMT) (Acquired 06/29/93, Cost $685,140) (c)................ 7.750 06/01/14 715,631
See Notes to Financial Statements 15 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- NEW HAMPSHIRE (CONTINUED) $ 1,000 New Hampshire St Business Fin Auth Rev Alice Peck Day Hlth Sys Ser A..................... 6.875% 10/01/19 $ 1,057,710 1,000 New Hampshire St Tpk Sys Rev Ser A Rfdg (FGIC Insd)................................. 6.750 11/01/11 1,037,340 ------------ 4,869,270 ------------ NEW JERSEY 6.1% 2,000 Camden Cnty, NJ Impt Auth Lease Rev Dockside Refrig (Acquired 01/29/97, Cost $2,074,739) (c) (g)..................................... 8.400 04/01/24 1,932,000 3,250 Landis, NJ Swr Auth Swr Rev (Inverse Fltg) (FGIC Insd)................................. 7.900 09/19/19 3,855,442 5,600 Middlesex Cnty, NJ Util Auth Swr Rev Ser A Rfdg (MBIA Insd)............................ 6.250 08/15/10 5,936,392 2,000 New Jersey Econ Dev Auth Holt Hauling & Warehsg Rev Ser G Rfdg (e).................. 8.400 12/15/15 1,750,000 2,000 New Jersey Econ Dev Auth Rev Cig Tax........ 5.750 06/15/34 2,099,100 1,900 New Jersey Econ Dev Auth Rev First Mtg Winchester Gardens Ser A (Prerefunded @ 11/01/06)................................... 8.500 11/01/16 1,991,219 565 New Jersey St Tpk Auth Tpk Rev (MBIA Insd)....................................... 6.500 01/01/16 653,293 190 New Jersey St Tpk Auth Tpk Rev Ser C (Escrowed to Maturity) (MBIA Insd).......... 6.500 01/01/16 221,145 2,725 New Jersey St Tpk Auth Tpk Rev Ser C (Escrowed to Maturity) (MBIA Insd).......... 6.500 01/01/16 3,165,578 5,710 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt Ser A (AMBAC Insd)...................... 5.750 09/15/10 6,066,704 10,000 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt Ser B (Prerefunded @ 09/15/10) (AMBAC Insd) (h)................................... 6.000 09/15/15 10,947,300 ------------ 38,618,173 ------------ NEW YORK 15.0% 5,000 Metropolitan Trans Auth NY Rev Ser B (FGIC Insd)....................................... 5.250 11/15/18 5,398,400 1,000 Nassau Cnty, NY Tob Settlement Corp Ser A-3......................................... 5.000 06/01/35 968,620 1,000 Nassau Cnty, NY Tob Settlement Corp Ser A-3......................................... 5.125 06/01/46 969,330 5,000 New York City Hsg Dev Corp Multi-Family Rev Hsg Ser K (AMT)............................. 5.000 11/01/37 5,039,550 2,300 New York City Indl Dev Agy Amern Airl JFK Intl Arpt (AMT)............................. 7.625 08/01/25 2,527,815 1,000 New York City Indl Dev Agy Amern Airl JFK Intl Arpt (AMT)............................. 7.750 08/01/31 1,108,410 3,000 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A....................... 6.250 03/01/15 3,159,450
16 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 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) (c)................................... 6.065% 06/15/27 $ 5,453,350 4,800 New York City Ser A......................... 7.000 08/01/07 4,922,448 2,930 New York City Ser B (MBIA Insd)............. 5.875 08/01/15 3,195,751 14,430 New York City Ser B (Prerefunded @ 08/01/10) (MBIA Insd)................................. 5.875 08/01/15 15,837,791 5,000 New York City Transitional Drivers Ser 307 (Inverse Fltg) (Acquired 11/06/02, Cost $5,439,826) (AMBAC Insd) (b) (c)............ 7.000 08/01/19 5,737,300 5,000 New York City Transitional Fin Auth Future Tax Secd Ser E.............................. 5.000 02/01/33 5,155,750 3,000 New York Cnty Tob Tr IV Settlement Pass Thru Ser A....................................... 5.000 06/01/42 2,857,890 695 New York St Dorm Auth Rev Mental Hlth Ser A........................................... 5.750 02/15/11 720,513 1,590 New York St Dorm Auth Rev Mental Hlth Ser A (Prerefunded @ 02/15/07).................... 5.750 02/15/11 1,651,183 680 New York St Dorm Auth Rev Mental Hlth Ser A........................................... 5.750 02/15/12 704,963 1,595 New York St Dorm Auth Rev Mental Hlth Ser A (Prerefunded @ 02/15/07).................... 5.750 02/15/12 1,656,376 2,500 New York St Energy Resh & Dev Auth Gas Fac Rev (Inverse Fltg).......................... 9.025 04/01/20 2,845,925 3,000 New York St Energy Resh & Dev Auth Gas Fac Rev Brooklyn Union Gas Ser B (Inverse Fltg) (AMT)....................................... 10.264 07/01/26 3,161,850 10,725 New York St Environmental Fac Rev Fds Second Resolution (b).............................. 5.000 06/15/20 11,345,978 10,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg........................................ 5.000 11/15/22 10,381,700 ------------ 94,800,343 ------------ NORTH CAROLINA 1.8% 2,000 Charlotte Mecklenberg Hosp Auth NC Hlthcare Sys Rev Carolina Hlthcare Sys Ser A......... 5.000 01/15/45 2,033,580 8,500 North Carolina Muni Pwr Agy Ser A (MBIA Insd)....................................... 5.250 01/01/19 9,057,855 ------------ 11,091,435 ------------ OHIO 0.5% 3,340 Adams Cnty Hosp Fac Impt Rev Adams Cnty Hosp Proj........................................ 6.250 09/01/20 3,370,528 ------------
See Notes to Financial Statements 17 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- OKLAHOMA 0.4% $ 2,250 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev (FGIC Insd)............................. 5.250% 10/01/29 $ 2,410,740 315 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class B (AMT) (GNMA Collateralized)......... 7.997 08/01/18 333,270 ------------ 2,744,010 ------------ OREGON 1.0% 5,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd)....................................... 5.250 07/01/22 5,326,650 1,000 Port Morrow, OR Pollutn Ctl Portland Gen A Rfdg (Variable Rate Coupon)................. 5.200 05/01/33 1,024,910 ------------ 6,351,560 ------------ PENNSYLVANIA 1.1% 1,000 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj................... 6.250 02/01/35 1,062,610 5,250 Philadelphia, PA Auth Indl Ser B (FSA Insd)....................................... 5.500 10/01/16 5,690,580 ------------ 6,753,190 ------------ RHODE ISLAND 0.5% 1,110 Rhode Island St Econ Dev Corp Rev (b)....... 7.250 07/01/10 1,141,568 2,000 Rhode Island St Hlth & Ed Bldg Higher Ed Johnson & Wales Rfdg (XLCA Insd)............ 5.375 04/01/19 2,135,620 ------------ 3,277,188 ------------ SOUTH CAROLINA 0.1% 700 Piedmont Muni Pwr Agy SC Elec Rev Rfdg...... 5.000 01/01/25 699,958 ------------ SOUTH DAKOTA 0.4% 1,000 South Dakota St Hlth & Ed Fac Auth Rev Huron Regl Med Ctr................................ 7.250 04/01/20 1,000,000 1,250 South Dakota St Hlth & Ed Fac Auth Rev Sioux Vly Hosp & Hlth Sys Ser A................... 5.250 11/01/34 1,294,213 ------------ 2,294,213 ------------ TENNESSEE 0.9% 1,000 Chattanooga, TN Hlth Ed & Hsg Fac Brd Rev CDFI Phase I LLC Proj Ser A Rfdg............ 5.000 10/01/25 983,490 4,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp Ser B Impt & Rfdg (MBIA Insd)............... 7.750 07/01/29 4,876,840 ------------ 5,860,330 ------------ TEXAS 12.1% 500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev Saint Luke's Lutheran Hosp (Escrowed to Maturity)................................... 7.000 05/01/21 643,795 3,170 Brazos Riv Auth TX Pollutn Ctl Rev Adj Elec Co Proj Ser C Rfdg (Variable Rate Coupon) (AMT)....................................... 5.750 05/01/36 3,356,364 90 Coastal Wtr Auth TX Conveyance Sys Rev (Escrowed to Maturity) (AMBAC Insd)......... 6.250 12/15/17 90,154
18 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 5,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A Impt & Rfdg (AMT) (FGIC Insd)............... 5.500% 11/01/31 $ 5,240,450 6,065 Harris Cnty, TX Toll Rd Sub Lien Rfdg....... 5.000 08/01/33 6,171,138 5,000 Harris Cnty-Houston, TX Sports Auth Spl Rev Jr Lien Ser B Rfdg (MBIA Insd).............. 5.250 11/15/40 5,192,750 10,000 Houston, TX Hotel Occupancy Tax Convtn & Entertnmnt Ser B (AMBAC Insd)............... 5.750 09/01/14 10,896,100 7,500 Lower CO Riv Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $7,623,805) (FSA Insd) (c).............................. 7.769 05/15/14 8,534,025 6,250 Lower CO Riv Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $6,312,134) (FSA Insd) (c).............................. 7.769 05/15/15 7,130,750 3,250 Lower CO Riv Auth TX Rev Ser A Rfdg (Inverse Fltg) (Acquired 10/20/99, Cost $3,254,875) (FSA Insd) (b) (c).......................... 7.769 05/15/16 3,711,988 5,000 Mabank, TX Indpt Sch Dist (PSF Gtd)......... 5.125 08/15/35 5,151,650 5,210 Mabank, TX Indpt Sch Dist (PSF Gtd) (b)..... 5.000 08/15/30 5,348,326 2,000 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj......................... 7.200 01/01/21 2,072,640 9,175 Midlothian, TX Indpt Sch Dist Rfdg (PSF Gtd)........................................ 5.000 02/15/34 9,368,593 1,375 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev Coll Ser C-2 Rfdg (Inverse Fltg) (AMT) (GNMA Collateralized)....................... 10.271 07/02/24 1,396,780 2,220 Wylie, TX Indpt Sch Dist Rfdg (PSF Gtd)..... 5.000 08/15/30 2,270,749 ------------ 76,576,252 ------------ UTAH 2.1% 1,340 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (e).................................... 7.800 09/01/15 482,400 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (e).................................... 8.000 09/01/20 360,000 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj (e).................................... 7.800 09/01/25 360,000 11,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg........................................ 6.150 02/15/12 12,096,260 ------------ 13,298,660 ------------ VERMONT 0.2% 1,000 Vermont Ed & Hlth Bldg Fin Agy Rev Bennington College Proj..................... 6.625 10/01/29 1,032,970 ------------ WASHINGTON 1.4% 8,000 King Cnty, WA Sch Dist No 411 (FGIC Insd) (b)......................................... 5.250 12/01/20 8,553,040 ------------
See Notes to Financial Statements 19 VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ---------------------------------------------------------------------------------------------- yWest 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 $ 1,541,715 4,000 West Virginia St Hosp Fin Auth Hosp Rev Bears & Bulls WV Univ Med Corp Rfdg (MBIA Insd)....................................... 6.100 01/01/18 4,110,920 ------------ 5,652,635 ------------ TOTAL MUNICIPAL BONDS 98.7%................................................... 624,583,093 ------------ TAXABLE NOTE 0.3% 1,614 UAL Corp.................................... 5.000 01/25/21 1,747,539 ------------
NUMBER DESCRIPTION OF SHARES VALUE - --------------------------------------------------------------------------------------------- EQUITY 0.0% GMT Holdings, LLC, Class B (i)..................................... 4,000 $ 0 ------------ TOTAL LONG-TERM INVESTMENTS 99.0% (Cost $609,773,170)......................................................... 626,330,632 SHORT-TERM INVESTMENT 0.2% (Cost $1,400,000)........................................................... 1,400,000 ------------ TOTAL INVESTMENTS 99.2% (Cost $611,173,170)......................................................... 627,730,632 OTHER ASSETS IN EXCESS OF LIABILITIES 0.8%................................... 5,073,375 ------------ NET ASSETS 100.0%............................................................ $632,804,007 ============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (b) The Fund owns 100% of the outstanding bond issuance. (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 10.8% of net assets. 20 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued (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) Non-income producing security. (f) Payment-in-kind security. (g) Interest is accruing at less than the stated coupon. (h) All or a portion of this security has been physically segregated in connection with open futures contracts. (i) Market value is determined in accordance with procedures established in good faith by the Board of Trustees. AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. PSF--Public School Fund XLCA--XL Capital Assurance Inc. FUTURES CONTRACTS OUTSTANDING AS OF MARCH 31, 2006
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 5-Year Futures June 2006 (Current Notional Value of $104,438 per contract).................. 61 $35,616 == =======
See Notes to Financial Statements 21 VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2006 (Unaudited) ASSETS: Total Investments (Cost $611,173,170)....................... $627,730,632 Cash........................................................ 263,197 Receivables: Interest.................................................. 8,501,886 Fund Shares Sold.......................................... 306,028 Investments Sold.......................................... 227,251 Other....................................................... 207,173 ------------ Total Assets............................................ 637,236,167 ------------ LIABILITIES: Payables: Investments Purchased..................................... 1,937,950 Fund Shares Repurchased................................... 876,551 Income Distributions...................................... 678,378 Investment Advisory Fee................................... 263,971 Distributor and Affiliates................................ 230,659 Variation Margin on Futures............................... 2,859 Trustees' Deferred Compensation and Retirement Plans........ 270,778 Accrued Expenses............................................ 171,014 ------------ Total Liabilities....................................... 4,432,160 ------------ NET ASSETS.................................................. $632,804,007 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $640,188,557 Net Unrealized Appreciation................................. 16,593,078 Accumulated Undistributed Net Investment Income............. 89,763 Accumulated Net Realized Loss............................... (24,067,391) ------------ NET ASSETS.................................................. $632,804,007 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $585,023,553 and 40,083,677 shares of beneficial interest issued and outstanding)............. $ 14.60 Maximum sales charge (4.75%* of offering price)......... .73 ------------ Maximum offering price to public........................ $ 15.33 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $33,160,052 and 2,275,082 shares of beneficial interest issued and outstanding)............. $ 14.58 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $13,451,529 and 924,316 shares of beneficial interest issued and outstanding)............. $ 14.55 ============ Class I Shares: Net asset value and offering price per share (Based on net assets of $1,168,873 and 80,110 shares of beneficial interest issued and outstanding)........................................ $ 14.59 ============
* On sales of $100,000 or more, the sales charge will be reduced. 22 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2006 (Unaudited) INVESTMENT INCOME: Interest.................................................... $16,234,238 ----------- EXPENSES: Investment Advisory Fee..................................... 1,547,135 Distribution (12b-1) and Service Fees (Attributed to Classes A, B, and C of $731,538, $181,333 and $65,636, respectively)............................................. 978,507 Shareholder Services........................................ 191,633 Legal....................................................... 39,058 Custody..................................................... 35,342 Trustees' Fees and Related Expenses......................... 18,014 Other....................................................... 211,595 ----------- Total Expenses.......................................... 3,021,284 Less Credits Earned on Cash Balances.................... 13,642 ----------- Net Expenses............................................ 3,007,642 ----------- NET INVESTMENT INCOME....................................... $13,226,596 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $(2,569,324) Futures................................................... 529,255 ----------- Net Realized Loss........................................... (2,040,069) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 19,006,762 ----------- End of the Period: Investments............................................. 16,557,462 Futures................................................. 35,616 ----------- 16,593,078 ----------- NET UNREALIZED DEPRECIATION DURING THE PERIOD............... (2,413,684) ----------- NET REALIZED AND UNREALIZED LOSS............................ $(4,453,753) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 8,772,843 ===========
See Notes to Financial Statements 23 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, 2006 SEPTEMBER 30, 2005 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 13,226,596 $ 28,142,888 Net Realized Gain/Loss............................... (2,040,069) 7,645,862 Net Unrealized Depreciation During the Period........ (2,413,684) (11,721,452) ------------ ------------ Change in Net Assets from Operations................. 8,772,843 24,067,298 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (12,960,342) (26,358,317) Class B Shares..................................... (674,657) (1,598,728) Class C Shares..................................... (244,208) (476,845) Class I Shares..................................... (28,322) (7,693) ------------ ------------ Total Distributions.................................. (13,907,529) (28,441,583) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... (5,134,686) (4,374,285) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 35,671,611 41,515,355 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 9,773,677 19,629,302 Cost of Shares Repurchased........................... (47,045,211) (89,121,245) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (1,599,923) (27,976,588) ------------ ------------ TOTAL DECREASE IN NET ASSETS......................... (6,734,609) (32,350,873) NET ASSETS:.......................................... Beginning of the Period.............................. 639,538,616 671,889,489 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $89,763 and $770,696, respectively)............................ $632,804,007 $639,538,616 ============ ============
24 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, ----------------------------------------------- 2006 2005 2004 2003 2002 (c) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $14.71 $14.81 $14.84 $15.03 $14.56 $14.06 ------ ------ ------ ------ ------ ------ Net Investment Income............ .31(a) .64(a) .66(a) .67(a) .71 .74 Net Realized and Unrealized Gain/Loss...................... (.09) (.09) (.05) (.19) .46 .49 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .22 .55 .61 .48 1.17 1.23 Less Distributions from Net Investment Income................ .33 .65 .64 .67 .70 .73 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $14.60 $14.71 $14.81 $14.84 $15.03 $14.56 ====== ====== ====== ====== ====== ====== Total Return (b)................... 1.48%* 3.78% 4.20% 3.31% 8.35% 8.93% Net Assets at End of the Period (In millions)........................ $585.0 $587.6 $609.4 $658.5 $696.4 $701.5 Ratio of Expenses to Average Net Assets........................... .89% .88% .89% .88% .87% .83% Ratio of Net Investment Income to Average Net Assets............... 4.24% 4.35% 4.46% 4.53% 4.89% 5.16% Portfolio Turnover................. 6%* 39% 15% 46% 49% 31%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million of more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (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. See Notes to Financial Statements 25 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, ----------------------------------------------- 2006 2005 2004 2003 2002 (c) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $14.69 $14.79 $14.82 $15.02 $14.54 $14.05 ------ ------ ------ ------ ------ ------ Net Investment Income............ .26(a) .53(a) .55(a) .56(a) .60 .63 Net Realized and Unrealized Gain/Loss...................... (.10) (.09) (.05) (.20) .48 .48 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .16 .44 .50 .36 1.08 1.11 Less Distributions from Net Investment Income................ .27 .54 .53 .56 .60 .62 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $14.58 $14.69 $14.79 $14.82 $15.02 $14.54 ====== ====== ====== ====== ====== ====== Total Return (b)................... .97%* 3.03% 3.41% 2.48% 7.64% 8.06% Net Assets at End of the Period (In millions)........................ $ 33.2 $ 38.1 $ 48.8 $ 58.4 $ 65.0 $ 66.6 Ratio of Expenses to Average Net Assets........................... 1.64% 1.63% 1.64% 1.63% 1.62% 1.59% Ratio of Net Investment Income to Average Net Assets............... 3.49% 3.60% 3.71% 3.78% 4.13% 4.40% Portfolio Turnover................. 6%* 39% 15% 46% 49% 31%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 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. 26 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, ----------------------------------------------- 2006 2005 2004 2003 2002 (c) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $14.67 $14.77 $14.80 $15.00 $14.52 $14.04 ------ ------ ------ ------ ------ ------ Net Investment Income............ .26(a) .53(a) .55(a) .56(a) .60 .63 Net Realized and Unrealized Gain/Loss...................... (.11) (.09) (.05) (.20) .48 .47 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .15 .44 .50 .36 1.08 1.10 Less Distributions from Net Investment Income................ .27 .54 .53 .56 .60 .62 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $14.55 $14.67 $14.77 $14.80 $15.00 $14.52 ====== ====== ====== ====== ====== ====== Total Return (b)................... 1.04%* 3.03% 3.43% 2.48% 7.65% 8.00% Net Assets at End of the Period (In millions)........................ $ 13.5 $ 12.5 $ 13.7 $ 17.0 $ 18.8 $ 17.4 Ratio of Expenses to Average Net Assets........................... 1.64% 1.63% 1.64% 1.63% 1.62% 1.62% Ratio of Net Investment Income to Average Net Assets............... 3.49% 3.60% 3.71% 3.78% 4.13% 4.37% Portfolio Turnover................. 6%* 39% 15% 46% 49% 31%
* Non-Annualized (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of 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. See Notes to Financial Statements 27 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.
AUGUST 12, 2005 SIX MONTHS (COMMENCEMENT CLASS I SHARES ENDED OF OPERATIONS) TO MARCH 31, 2006 SEPTEMBER 30, 2005 ------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD................. $14.71 $14.71 ------ ------ Net Investment Income (a).............................. .33 .09 Net Realized and Unrealized Loss....................... (.11) -0-** ------ ------ Total from Investment Operations......................... .22 .09 Less Distributions from Net Investment Income............ .34 .09 ------ ------ NET ASSET VALUE, END OF THE PERIOD....................... $14.59 $14.71 ====== ====== Total Return (b)......................................... 1.53%* .60%* Net Assets at End of the Period (In millions)............ $ 1.2 $ 1.3 Ratio of Expenses to Average Net Assets.................. .64% .66% Ratio of Net Investment Income to Average Net Assets..... 4.49% 4.56% Portfolio Turnover....................................... 6%* 39%
* Non-Annualized ** Amount is less than $.01. (a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period. This return does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 28 See Notes to Financial Statements VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class-specific expenses and voting rights on the matters affecting a single class. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Future contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Legal expenditures that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2006, the Fund had no when-issued and delayed delivery purchase commitments. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental transfer agency costs which are unique to each class of shares. 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 29 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued these losses against any future realized capital gains. At September 30, 2005, the Fund had an accumulated capital loss carryforward for tax purposes of $22,055,994, which will expire according to the following schedule.
AMOUNT EXPIRATION $5,079,306.................................................. September 30, 2008 9,728,055.................................................. September 30, 2009 7,248,633.................................................. September 30, 2010
At March 31, 2006, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $611,031,910 ============ Gross tax unrealized appreciation........................... $ 25,632,921 Gross tax unrealized depreciation........................... (8,934,199) ------------ Net tax unrealized appreciation investments................. $ 16,698,722 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains and gains on futures transactions. All short-term capital gains and a portion of futures gains are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2005 was as follows: Distribution paid from: Ordinary income........................................... $117,584 Long-term capital gain.................................... -0- -------- $117,584 ========
As of September 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $106,600
Net realized gains or losses may differ for financial reporting and tax purposes primarily as a result of gains or losses recognized for tax purposes, but not for book purposes. F. EXPENSE REDUCTIONS During the six months ended March 31, 2006, the Fund's custody fee was reduced by $13,642 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%
30 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued For the six months ended March 31, 2006, the Fund recognized expenses of approximately $8,800 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment Agreements, the Adviser provides accounting and legal services and the CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $51,500, representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $155,100 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are 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 $175,816 are included in "Other" assets on the Statements of Assets and Liabilities at March 31, 2006. Appreciation/ depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. For the six months ended March 31, 2006, Van Kampen as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $66,000 and CDSC on redeemed shares of approximately $36,700. Sales charges do not represent expenses of the Fund. 31 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS For the six months ended March 31, 2006 and the year ended September 30, 2005, transactions were as follows:
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2006 SEPTEMBER 30, 2005 -------------------------- -------------------------- SHARES VALUE SHARES VALUE Sales: Class A............................ 2,086,931 $ 30,567,884 2,412,267 $ 35,680,084 Class B............................ 161,460 2,358,707 177,415 2,622,903 Class C............................ 185,628 2,705,289 130,335 1,918,515 Class I............................ 2,717 39,731 87,953 1,293,853 ---------- ------------ ---------- ------------ Total Sales.......................... 2,436,736 $ 35,671,611 2,807,970 $ 41,515,355 ========== ============ ========== ============ Dividend Reinvestment: Class A............................ 623,497 $ 9,121,688 1,233,680 $ 18,241,199 Class B............................ 30,492 444,945 69,165 1,021,344 Class C............................ 12,254 178,722 24,348 359,067 Class I............................ 1,937 28,322 521 7,692 ---------- ------------ ---------- ------------ Total Dividend Reinvestment.......... 668,180 $ 9,773,677 1,327,714 $ 19,629,302 ========== ============ ========== ============ Repurchases: Class A............................ (2,565,748) $(37,552,563) (4,851,772) $(71,717,331) Class B............................ (511,257) (7,464,315) (952,114) (14,055,751) Class C............................ (127,919) (1,868,164) (225,130) (3,317,881) Class I............................ (10,969) (160,169) (2,049) (30,282) ---------- ------------ ---------- ------------ Total Repurchases.................... (3,215,893) $(47,045,211) (6,031,065) $(89,121,245) ========== ============ ========== ============
4. REDEMPTION FEE The Fund will assess a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within seven days of purchase. The redemption fee is paid directly to the Fund. For the six months ended March 31, 2006, the Fund received redemption fees of approximately $200, which are reported as part of "Cost of Shares Repurchased" on the Statement of Changes in Net Assets. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $40,717,486 and $43,579,102, respectively. 6. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund may use derivative instruments for a variety of reasons, such as to attempt to protect the Fund against possible changes in the market value of its portfolio, to manage the portfolio's effective yield, maturity and duration, or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the 32 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counter parties to meet the terms of their contracts. Summarized below are the different types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures on U.S. Treasury Notes and typically closes the contract prior to delivery date. Upon entering into futures contracts, the Fund maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the six months ended March 31, 2006, were as follows:
CONTRACTS Outstanding at September 30, 2005........................... 438 Futures Opened.............................................. 1,095 Futures Closed.............................................. (1,472) ------ Outstanding at March 31, 2006............................... 61 ======
B. INDEXED SECURITY An inverse floating rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. These instruments are identified in the portfolio of investments. 7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate the Distributor for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $2,473,200 and $195,200 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. 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 33 VAN KAMPEN MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued class action complaints which were 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. Plaintiffs filed a Motion for Leave to file a Supplemental Pleading that would, among other things, expand the allegations and alleged class. The defendants moved to dismiss this action, which motion was granted in its entirety. Additionally, plaintiffs' Motion for Leave to file a Supplemental Pleading was denied. This matter is now concluded. 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 sought leave to file a second amended derivative complaint 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. Additionally, plaintiff's initial complaint regarding allegations of economic incentives was stayed pending certain procedural developments. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. Defendants' motion to dismiss in the market timing litigation was granted in part and denied in part, and defendants filed a motion for reconsideration of the Court's decision to uphold certain of the plaintiff's claims. Additionally, plaintiff and the named Trustees entered into a tolling agreement. The tolling agreement dismisses the Trustees from the action without prejudice in exchange for tolling all claims against the Trustees. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 9. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 34 VAN KAMPEN MUNICIPAL INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer J. DAVID GERMANY Vice President DENNIS SHEA Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer PHILLIP G. GOFF Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 35 Van Kampen Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 49, 349, 549 MIF SAR 5/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RA06-00371P-Y03/06 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Intermediate Term Municipal Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments as of March 31, 2006. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN A CLASS I SHARE PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 3/31/06
A SHARES B SHARES C SHARES I SHARES 5/28/93 5/28/93 10/19/93 8/12/05 - ------------------------------------------------------------------------------------------------ W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES Since Inception 5.25% 4.86% 4.90% 4.90% 4.19% 4.19% 1.40% 10-year 4.94 4.43 4.47 4.47 4.18 4.18 -- 5-year 4.59 3.58 4.19 3.93 3.87 3.87 -- 1-year 3.39 -1.53 3.39 -0.61 2.62 1.63 -- 6-month 0.89 -3.88 0.91 -3.04 0.51 -0.48 1.01 - ------------------------------------------------------------------------------------------------ 30-Day SEC Yield 3.06% 3.21% 2.46% 3.46% - ------------------------------------------------------------------------------------------------ 30-Day SEC Unsubsidized Yield 2.96% 3.11% 2.36% 3.36%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BECAUSE CLASS B SHARES INCURRED LOWER EXPENSES UNDER THE 12B-1 PLAN THAN DID CLASS A SHARES FOR THE FISCAL PERIOD ENDED MARCH 31, 2006, THE TOTAL OPERATING EXPENSE RATIO FOR CLASS B SHARES WAS LOWER AND, AS A RESULT, THE PERFORMANCE OF CLASS B SHARES WAS HIGHER THAN THAT OF CLASS A SHARES. THERE CAN BE NO ASSURANCE THAT THIS WILL CONTINUE TO OCCUR IN THE FUTURE AS THE MAXIMUM FEES PAYABLE BY CLASS B SHARES UNDER THE 12B-1 PLAN ARE HIGHER THAN THOSE PAYABLE BY CLASS A SHARES. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance of share classes will vary due to differences in sales charges and expenses. Average annual total return with sales charges includes payment of the maximum sales charge of 4.75 percent for Class A shares, a contingent deferred sales charge of 4.00 percent for Class B shares (in years one and two and declining to zero after year five), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C shares. The since inception and 10-year returns for Class B shares reflect the conversion of Class B shares into Class A shares 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. Class I shares are available for purchase exclusively by investors through (i) tax-exempt retirement plans with assets of at least $1 million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase plans, defined benefit plans and non-qualified deferred compensation plans), (ii) fee-based investment programs with assets of at least $1 million and (iii) institutional clients with assets of at least $1 million. Class I shares are offered without any sales charges on purchases or sales and do not include combined Rule 12b-1 fees and service fees. Figures shown above assume reinvestment of all dividends and capital gains. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. SEC yield is a calculation for determining the amount of portfolio income, excluding nonincome items as prescribed by the SEC. The unsubsidized SEC yields reflect some or all of the expenses that the adviser had voluntarily waived. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Index data source: Lipper Inc. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006 MARKET CONDITIONS Despite the shadow of rising oil prices, the devastation of the Gulf Coast hurricanes, and emerging weakness in the housing market, the economy continued to grow during the six-month period ended March 31, 2006. This expansion was more modest in the fourth quarter of 2005, but gained considerable momentum in the first quarter of 2006. Against the backdrop of growth and good employment data, the Federal Open Market Committee (the "Fed") continued raising the federal funds target rate during the period, implementing four additional increases of 25 basis points each. The final hike of the period represented the fifteenth consecutive increase--the longest stretch of increases in 25 years. As the period came to a close, market observers speculated about the Fed's near-term intentions, given the central bank's view that although longer-term inflation appeared contained, commodity prices could amplify inflationary pressures. Returns across the municipal bond market varied significantly. As investors sought income opportunities, lower rated bonds outpaced investment-grade bonds by a wide margin. Long-term bonds earned the best returns, broadly speaking, while bonds in the three-to-seven year range posted the most muted gains. Municipal bond issuance was robust during the final months of 2005. (In fact, 2005 marked a record high for municipal bond volume.) The tide changed in the first quarter of 2006, however. As rising rates discouraged issuers from refinancing debt, national municipal issuance dropped versus the same period a year ago. While supply ebbed, the market's appetite for municipal bonds remained strong, with particularly heavy demand from high yield municipal bond funds. PERFORMANCE ANALYSIS The fund returned 0.89 percent for the six months ended March 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 0.98 percent for the period. 2 TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006
- ------------------------------------------------------------------------ LEHMAN BROTHERS CLASS A CLASS B CLASS C CLASS I MUNICIPAL BOND INDEX 0.89% 0.91% 0.51% 1.01% 0.98% - ------------------------------------------------------------------------
The performance for the four share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and index definition. Because Class B shares incurred lower expenses under the 12b-1 Plan than did Class A shares for the fiscal period ended March 31, 2006, the total operating expense ratio for Class B shares was lower and, as a result, the performance of Class B shares was higher than that of Class A shares. There can be no assurance that this will continue to occur in the future as the maximum fees payable by Class B shares under the 12b-1 Plan are higher than those payable by Class A shares. We sought to increase the yield potential of the portfolio within the framework of our investment strategy. Following our long-standing "relative value" discipline, we favored high quality bonds with good liquidity. (Liquid securities are those for which there is a robust market of purchasers and sellers.) Based on our in-depth proprietary research, we purchased bonds we believed to be attractively valued, and then sold them when they reached our return targets. We then invested the proceeds into bonds which we believed offered greater future total return prospects. Several factors drove the fund's performance during the period. While the majority of the portfolio was invested in bonds rated AA and higher, the portfolio's overweight relative to its benchmark in BBB rated and non-rated bonds proved beneficial. In an environment of relatively low interest rates, demand for higher-yielding credits remained strong. Our analysis had suggested that interest rates would continue to rise, with the yields of short-term bonds advancing more rapidly than those of long-term issues. Accordingly, we kept the fund's duration (a measure of interest rate sensitivity) shorter than that of the Lehman benchmark, and this strategy contributed to the fund's relative performance. The fund also benefited from its "barbell" structure. Specifically, we emphasized bonds with very short maturities and long maturities. This resulted in an overweighted position in long-term bonds--the strongest performers--relative to the Lehman benchmark, and a significantly underweighted position in the segment of the curve that performed most tepidly. We found lucrative opportunities to sell high-quality bonds at tight spreads capturing good appreciation. We invested the proceeds of the fund's sales into a variety of higher yielding investment-grade and non-rated issues. 3 The fund remained well diversified across the major sectors of the municipal market, with a focus on essential services. At the close of the period, public education, general purpose and hospital represented the fund's largest sector weightings. Reflecting our focus on high quality securities, 67 percent of the portfolio was rated AA or above at the close of the period. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. 4
RATINGS ALLOCATIONS AS OF 3/31/06 AAA/Aaa 57.8% AA/Aa 9.2 A/A 7.0 BBB/Baa 10.5 BB/Ba 0.5 Non-Rated 15.0 TOP FIVE SECTORS AS OF 3/31/06 Public Education 18.4% General Purpose 10.1 Hospital 10.1 Retail Electric 10.0 Higher Education 6.4 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/06 Pennsylvania 10.0% New Jersey 8.6 Missouri 7.8 Alabama 5.3 Florida 5.2 Illinois 5.2 Ohio 4.9 California 4.8 New York 4.1 Oregon 4.1 Colorado 3.5 Maryland 2.9 Michigan 2.9 Texas 2.7 Indiana 2.6 Tennessee 2.3 Arkansas 2.2 Arizona 2.1 Kansas 2.0 South Carolina 1.9 New Mexico 1.6 North Carolina 1.5 South Dakota 1.4 West Virginia 1.4 Connecticut 1.1 Kentucky 1.0 Nebraska 0.9 Virginia 0.9 Washington 0.5 Wisconsin 0.4 Georgia 0.2 Montana 0.2 Massachusetts 0.2
(continued on next page)
5
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 3/31/06 (continued from previous page) Rhode Island 0.1 Minnesota 0.0* ----- Total Long-Term Investments 96.5% Short-Term Investments 3.7 ----- Total Investments 100.2 Liabilities in Excess of Other Assets (0.2) ----- Total Net Assets 100.0%
* Amount is less than 0.1% Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Subject to change daily. Ratings allocations and sector percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Summary of investments by state classification are as a percentage of total net assets. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 6 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters 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 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 7 HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 8 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales 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 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 10/1/05 - 3/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. 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* ------------------------------------------------- 10/1/05 3/31/06 10/1/05-3/31/06 Class A Actual..................................... $1,000.00 $1,008.88 $5.16 Hypothetical............................... 1,000.00 1,019.83 5.19 (5% annual return before expenses) Class B Actual..................................... 1,000.00 1,009.08 5.01 Hypothetical............................... 1,000.00 1,019.93 5.04 (5% annual return before expenses) Class C Actual..................................... 1,000.00 1,005.09 8.90 Hypothetical............................... 1,000.00 1,016.03 8.95 (5% annual return before expenses) Class I Actual..................................... 1,000.00 1,010.15 3.91 Hypothetical............................... 1,000.00 1,021.03 3.93 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 1.03%, 1.00%, 1.78% and 0.78% for Class A, B, C and I 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 waiver. Assumes all dividends and distributions were reinvested. 9 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ MUNICIPAL BONDS 96.5% ALABAMA 5.3% $1,260 Dothan Houston Cnty, AL Arpt Auth (AMT) (MBIA Insd) (a)...................................... 5.400% 12/01/15 $ 1,339,556 1,890 Elmore Cnty, AL Ltd Oblig Sch Wts (FSA Insd) (a)............................................ 5.000 02/01/20 1,981,306 1,405 Greenville, AL Wts Rfdg (XLCA Insd)............ 5.000 01/01/18 1,475,475 1,000 Jefferson Cnty, AL Ltd Oblig Ser A............. 5.000 01/01/07 1,009,770 200 West Jefferson Cnty, AL Amusement & Pub Park Auth (Prerefunded @ 12/01/06).................. 7.500 12/01/08 207,684 ------------ 6,013,791 ------------ ARIZONA 2.1% 1,000 Arizona St Univ Rev Sys Rfdg (AMBAC Insd)...... 5.000 07/01/20 1,054,070 800 Maricopa Cnty, AZ Uni Sch Impt Proj of 2002 Ser B (FSA Insd)................................... 5.250 07/01/16 863,504 480 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig Irvington Proj Tucson Ser A Rfdg (FSA Insd).......................................... 7.250 07/15/10 484,138 ------------ 2,401,712 ------------ ARKANSAS 2.2% 1,000 Arkansas St Fed Hwy Grant Antic Ser A.......... 5.500 08/01/06 1,006,710 500 University of AR Rev Pine Bluff Campus Ser A Rfdg (AMBAC Insd) (a).......................... 5.000 12/01/17 530,910 950 University of AR Rev UALR Cap Impt Ser B (FSA Insd).......................................... 4.500 12/01/19 968,050 ------------ 2,505,670 ------------ CALIFORNIA 4.8% 1,090 California Edl Fac Auth Rev Occidental College Ser A (MBIA Insd) (a).......................... 5.000 10/01/20 1,154,670 1,000 California St (AMBAC Insd) (b)................. 6.400 09/01/08 1,065,940 1,500 California St Dept Wtr Res Pwr Ser A (Prerefunded @ 05/01/12) (AMBAC Insd).......... 5.375 05/01/18 1,646,670 385 Fairfield Suisun, CA Uni Sch Election 2002 (MBIA Insd).................................... 5.250 08/01/18 414,387 1,100 Santa Clara, CA Elec Rev Sub Ser A (MBIA Insd).......................................... 5.250 07/01/20 1,181,785 ------------ 5,463,452 ------------ COLORADO 3.5% 150 Colorado Hlth Fac Auth Rev Sr Living Fac Eaton Ter Ser A...................................... 6.800 07/01/09 155,611 1,560 Colorado Springs, CO Utils Rev Sys Sub Lien Impt Ser A..................................... 5.000 11/15/19 1,644,568 1,000 Denver, CO City & Cnty Arpt Rev Ser D Rfdg (AMT) (FSA Insd)............................... 5.500 11/15/12 1,066,150 1,000 Weld & Adams Cntys, CO Sch Dist (FSA Insd)..... 5.000 12/15/21 1,052,920 ------------ 3,919,249 ------------
10 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ CONNECTICUT 1.1% $1,000 Connecticut St Hlth & Edl Fac Auth Rev Griffin Hosp Ser B (Radian Insd)....................... 5.000% 07/01/11 $ 1,047,840 215 New Haven, CT Indl Fac Rev Adj Govt Ctr Thermal Energies (AMT)................................. 7.250 07/01/09 215,505 ------------ 1,263,345 ------------ FLORIDA 5.2% 500 Baywinds Cmnty Dev Dist FL Spl Assmt Ser B (c)............................................ 4.900 05/01/12 500,000 1,000 Brevard Cnty, FL Sch Brd Ctfs Ser B Rfdg (FGIC Insd).......................................... 5.000 07/01/20 1,047,190 2,000 Broward Cnty, FL Arpt Sys Rev Ser E Rfdg (AMT) (MBIA Insd) (b)................................ 5.375 10/01/13 2,084,620 140 Lee Cnty, FL Indl Dev Auth Econ Rev Encore Nursing Ctr Part Rfdg.......................... 8.125 12/01/07 140,132 40 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg (Escrowed to Maturity)................................... 8.125 07/01/06 40,450 250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg Orlando Lutheran Twr Rfdg (Prerefunded @ 07/01/06)...................................... 8.625 07/01/20 260,547 1,500 Orange Cnty, FL Sch Brd Ctf Ser A (AMBAC Insd).......................................... 5.250 08/01/14 1,609,650 210 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj Rfdg (Escrowed to Maturity)............... 7.125 11/01/06 212,159 ------------ 5,894,748 ------------ GEORGIA 0.2% 230 Forsyth Cnty, GA Hosp Auth Rev Antic Ctfs GA Baptist Hlthcare Sys Proj (Escrowed to Maturity)...................................... 6.000 10/01/08 237,167 ------------ ILLINOIS 5.2% 545 Clay Cnty, IL Hosp Rev (Prerefunded @ 12/1/08) (a)............................................ 5.500 12/01/10 575,613 500 Hodgkins, IL Tax Increment Rev Sr Lien Rfdg.... 5.000 01/01/14 518,490 80 Huntley, IL Spl Svc Area No 7 Spl Tax.......... 6.000 03/01/09 81,101 500 Illinois Fin Auth Rev Landing at Plymouth Pl Proj Ser A..................................... 5.250 05/15/14 496,025 1,010 Illinois Fin Auth Student Hsg Rev MJH Ed Assistance IV Sr Ser A (a)..................... 5.000 06/01/09 1,031,412 1,000 Illinois Fin Auth Student Hsg Rev MJH Ed Assistance IV Sr Ser A......................... 5.500 06/01/19 1,047,800 500 Lincolnshire, IL Spl Svc Area Sedgebrook Proj........................................... 5.000 03/01/11 510,790 130 Peoria, IL Spl Tax Weaverridge Spl Svc Area.... 7.625 02/01/08 136,324 439 Pingree Grove Village, IL Spl Svc Area No 1 Spl Tax Ser 05-1 Cambridge Lakes Proj.............. 5.250 03/01/15 444,751 1,000 Round Lake Beach, IL Tax....................... 4.650 12/15/13 1,005,890 ------------ 5,848,196 ------------
See Notes to Financial Statements 11 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ INDIANA 2.6% $1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg (AMBAC Insd)................................... 5.500% 01/01/18 $ 1,078,810 1,400 Indiana Bd Bk Spl Prog Hendricks Redev Ser B (Prerefunded @ 02/01/07)....................... 6.000 02/01/12 1,455,006 400 Saint Joseph Cnty, IN Econ Dev Rev Holy Cross Vlg Notre Dame Proj Ser A...................... 5.750 05/15/13 413,336 ------------ 2,947,152 ------------ KANSAS 2.0% 500 Burlington, KS Envrn Impt Rev.................. 4.750 09/01/15 504,615 500 Kansas St Dev Fin Auth Hlth Fac Rev Hays Med Ctr Inc Ser L.................................. 5.250 11/15/16 529,320 1,000 Shawnee Cnty, KS Sch Dist 501 Topeka........... 5.000 02/01/20 1,048,120 220 Wyandotte Cnty, KS City KS Univ Brd of Public Utility Office Bldg Complex Proj (MBIA Insd)... 5.000 05/01/11 231,937 ------------ 2,313,992 ------------ KENTUCKY 1.0% 1,000 Louisville & Jefferson Cnty, KY Ser C (AMT) (FSA Insd)..................................... 5.500 07/01/17 1,074,320 ------------ MARYLAND 2.9% 1,000 Baltimore, MD Convention Ctr Hotel Rev Ser A (XLCA Insd).................................... 5.250 09/01/22 1,080,360 1,000 Maryland St Econ Dev Corp Student Hsg Rev Univ MD College Park Proj Rfdg (CIFG Insd) (c)...... 5.000 06/01/13 1,060,440 625 Maryland St Econ Dev Corp Univ MD College Park Proj (Escrowed to Maturity).................... 5.750 06/01/13 692,737 500 Prince Georges Cnty, MD Spl Oblig Natl Harbor Proj.................................... 4.700 07/01/15 507,275 ------------ 3,340,812 ------------ MASSACHUSETTS 0.2% 35 Massachusetts St Indl Fin Agy East Boston Neighborhood Proj.............................. 7.250 07/01/06 34,987 140 Massachusetts St Indl Fin Agy Rev Gtr Lynn Mental Hlth (Escrowed to Maturity) (Acquired 06/24/1998, Cost $140,000) (d)................. 6.200 06/01/08 146,373 ------------ 181,360 ------------ MICHIGAN 2.9% 1,000 Brighton, MI Area Sch Dist Rfdg (a)............ 5.250 05/01/18 1,069,730 1,000 Brighton, MI Area Sch Dist Rfdg................ 5.250 05/01/20 1,069,730 335 John Tolfree Hlth Sys Corp MI Mtg Rev Rfdg..... 5.450 09/15/06 336,296 500 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser A.............................................. 5.000 07/01/09 509,945 250 Michigan St Strategic Fd Ltd Oblig United Waste Sys Proj (AMT)................................. 5.200 04/01/10 258,372 ------------ 3,244,073 ------------
12 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ MINNESOTA 0.0% $ 50 Minneapolis, MN Multi-Family Rev Hsg Belmont Apts Proj (AMT) (a)............................ 7.000% 11/01/06 $ 50,093 ------------ MISSOURI 7.8% 500 Carthage, MO Hosp Rev.......................... 4.000 04/01/07 500,040 610 Ferguson, MO Tax Increment Rev Crossing at Halls Ferry Rfdg (a)........................... 5.500 04/01/14 623,652 1,350 Kansas City, MO Indl Dev Auth Plaza Lib Proj... 6.000 03/01/16 1,401,988 1,000 Macon, MO Ctfs Partn (MBIA Insd)............... 5.250 08/01/17 1,041,860 830 Missouri St Dev Fin Brd Fac Rev Pub Safety Proj Ser A (a)...................................... 5.000 03/01/11 855,730 2,125 O' Fallon, MO Ctfs Partn (MBIA Insd) (a)....... 5.375 02/01/18 2,273,516 2,000 Saint Charles, MO Ctf Partn Ser B.............. 5.500 05/01/18 2,095,620 ------------ 8,792,406 ------------ MONTANA 0.2% 210 Crow Fin Auth, MT Tribal Purp Rev (Acquired 12/11/1997, Cost $210,000) (d)................. 5.400 10/01/07 213,753 ------------ NEBRASKA 0.9% 1,000 Dodge Cnty, NE Sch Dist 001 Rfdg (FSA Insd).... 5.000 12/15/18 1,053,670 ------------ NEW JERSEY 8.6% 1,000 Casino Reinvestment Dev Auth NJ Hotel Room Fee Rev (AMBAC Insd)............................... 5.250 01/01/20 1,083,260 1,400 Essex Cnty, NJ Impt Auth Lease Gtd Cnty Correctional Fac Proj (Prerefunded @ 10/01/10) (FGIC Insd).................................... 5.750 10/01/30 1,519,476 460 Middlesex Cnty, NJ Impt Auth Street Student Hsg Proj Ser A..................................... 2.500 08/15/06 457,732 1,000 Morris Union Jointure Cmnty NJ Ctfs Part (Radian Insd).................................. 5.250 05/01/20 1,062,270 400 New Jersey Econ Dev Auth First Mtg Winchester Ser A Rfdg..................................... 3.000 11/01/06 397,044 1,500 New Jersey Econ Dev Auth Rev Cigarette Tax..... 5.500 06/15/16 1,617,105 415 New Jersey Hlthcare Fac Fin Auth Rev Christ Hosp Group Issue (Escrowed to Maturity) (Connie Lee Insd)...................................... 7.000 07/01/06 418,544 1,000 New Jersey Hlthcare Fac Fin Auth Rev St. Clare's Hosp Inc Ser A Rfdg (Radian Insd)...... 5.250 07/01/20 1,060,340 1,000 New Jersey Hlthcare Fac Fin Auth Rev Virtua Hlth Issue (FSA Insd).......................... 5.250 07/01/10 1,048,750 455 Rahway, NJ Ctfs Partn (MBIA Insd).............. 5.500 02/15/16 488,734 565 Rahway, NJ Ctfs Partn (MBIA Insd).............. 5.600 02/15/17 609,313 ------------ 9,762,568 ------------
See Notes to Financial Statements 13 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ NEW MEXICO 1.6% $1,000 Jicarilla, NM Apache Nation Rev Ser A (Acquired 10/23/2003, Cost $1,020,380) (d)............... 5.500% 09/01/23 $ 1,055,400 700 Jicarilla, NM Apache Nation Rev Ser A (Acquired 10/23/2003, Cost $728,707) (d)................. 4.000 09/01/08 702,898 ------------ 1,758,298 ------------ NEW YORK 4.1% 205 Brookhaven, NY Indl Dev Agy Sr Residential Hsg Rev Woodcrest Estates Fac Ser A (AMT).......... 5.875 12/01/09 208,967 1,000 Long Island Pwr Auth NY Elec Gen Ser C......... 5.500 09/01/17 1,081,740 500 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A................................ 6.250 03/01/15 526,575 780 New York City Indl Dev Agy Spl Fac Rev Terminal One Group Assn Proj (AMT)...................... 5.000 01/01/10 803,439 480 New York City Ser A............................ 7.000 08/01/07 492,245 20 New York City Ser A (Prerefunded @ 08/01/06)... 7.000 08/01/07 20,529 500 New York St Dorm Auth Rev Mt Sinai NYU Hlth Ser C.............................................. 5.000 07/01/11 505,630 5 Niagara Falls, NY Pub Impt (MBIA Insd)......... 6.900 03/01/20 5,014 1,000 Tobacco Settlement Fin Corp NY Ser C-1......... 5.250 06/01/13 1,031,200 ------------ 4,675,339 ------------ NORTH CAROLINA 1.5% 630 North Carolina Eastn Mun Pwr Agy Pwr Sys Rev Ser D.......................................... 6.450 01/01/14 686,221 1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd).......................................... 5.250 01/01/19 1,065,630 ------------ 1,751,851 ------------ OHIO 4.9% 500 Adams Cnty Hosp Fac Impt Rev Adams Cnty Hosp Proj........................................... 6.250 09/01/20 504,570 500 Athens Cnty, OH Hosp Fac Rev & Impt O' Bleness Mem Ser A Rfdg................................. 6.250 11/15/13 523,720 1,370 Cleveland, OH Non Tax Rev Cleveland Stadium Proj Rfdg (AMBAC Insd)......................... 5.125 12/01/20 1,451,679 500 Dayton, OH Spl Fac Rev Afco Cargo Day LLC Proj (AMT).......................................... 6.000 04/01/09 498,175 1,000 Ohio Mun Elec Generation Agy Jt Venture 5 Ctfs Ben Int Rfdg (AMBAC Insd)...................... 5.000 02/15/21 1,043,230 1,160 Sugarcreek, OH Loc Sch Dist Sch Impt Rfdg (MBIA Insd) (a)...................................... 5.250 12/01/18 1,248,114 325 Toledo, OH Swr Sys Rev (AMBAC Insd)............ 5.000 11/15/18 343,291 ------------ 5,612,779 ------------
14 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ OREGON 4.1% $2,575 Emerald Peoples Util Dist OR Ser A Rfdg (FSA Insd) (a)...................................... 5.250% 11/01/16 $ 2,782,442 785 Oregon St Dept Admin Svcs Lottery Rev Ser B (FSA Insd)..................................... 5.000 04/01/18 829,211 1,000 Port Morrow, OR Pollutn Ctl Portland Gen Ser A Rfdg (Mandatory Put @ 05/01/09)................ 5.200 05/01/33 1,024,910 ------------ 4,636,563 ------------ PENNSYLVANIA 10.0% 250 Allegheny Cnty, PA Redev Auth Rev Pittsburgh Mills Proj..................................... 5.100 07/01/14 258,918 1,220 Canon McMillan Sch Dist PA Ser A Rfdg (MBIA Insd).................................... 5.000 12/15/15 1,295,652 500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg Whitemarsh Cont Care Proj...................... 6.000 02/01/21 527,275 1,150 Philadelphia, PA Gas Wks Rev Eighteenth Ser.... 5.250 08/01/18 1,224,520 900 Philadelphia, PA Gas Wks Rev Third Ser (FSA Insd)..................................... 5.000 08/01/10 942,471 2,000 Philadelphia, PA Redev Auth Rev Neighborhood Trans Ser A (FGIC Insd)........................ 5.500 04/15/16 2,163,520 1,500 Springfield, PA Sch Dist DE Ser A (FGIC Insd).......................................... 5.000 03/15/20 1,573,695 1,090 Wilson, PA Area Sch Dist (FGIC Insd)........... 5.125 03/15/17 1,158,125 2,070 York Cnty, PA Sch Technology (FGIC Insd)....... 5.375 02/15/16 2,241,893 ------------ 11,386,069 ------------ RHODE ISLAND 0.1% 150 Rhode Island St Econ Dev Grant Antic RI Dept Trans Ser A (FSA Insd)......................... 5.000 06/15/15 158,936 ------------ SOUTH CAROLINA 1.9% 1,020 Berkeley Cnty, SC Impt & Rfdg (FSA Insd)....... 5.000 09/01/17 1,077,161 1,065 Lexington, SC Wtr & Swr Rev & Impt Comb Ser A Rfdg (MBIA Insd) (a)........................... 5.000 04/01/14 1,116,195 ------------ 2,193,356 ------------ SOUTH DAKOTA 1.4% 1,515 Minnehaha Cnty, SD Ctfs Ltd Tax (FSA Insd)..... 5.000 12/01/18 1,600,476 ------------ TENNESSEE 2.3% 495 Chattanooga, TN Hlth Edl Hsg Fac CDFI Phase I LLC Proj Ser A Rfdg............................ 5.000 10/01/15 502,673 700 Franklin, TN Spl Sch Dist Cap Apprec (FSA Insd)..................................... * 06/01/15 475,391 1,000 Gatlinburg, TN Pub Bldg Auth Rfdg (AMBAC Insd).......................................... 5.750 12/01/11 1,097,340 500 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev Trezevant Manor Proj Ser A..................... 5.250 09/01/16 495,355 ------------ 2,570,759 ------------
See Notes to Financial Statements 15 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - ------------------------------------------------------------------------------------------ TEXAS 2.7% $ 395 Brazos Riv Auth TX Pollutn Ctl Rev Adj TXU Elec Co Proj Ser C Rfdg (AMT) (Mandatory Put @ 11/01/11).................................... 5.750% 05/01/36 $ 418,222 500 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc Proj....................................... 5.000 08/15/13 509,010 350 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc Proj....................................... 5.000 08/15/19 351,904 1,000 Lower Colorado Riv Auth TX LCRA Svcs Corp Proj Rfdg (FGIC Insd)............................... 5.000 05/15/17 1,042,330 500 Mesquite, TX Hlth Fac Dev Retirement Christian Care........................................... 5.000 02/15/15 506,445 250 San Antonio, TX Hsg Fin Corp Multi-Family Hsg Rev Beverly Oaks Apt Proj Ser A (a)............ 7.500 02/01/10 245,700 ------------ 3,073,611 ------------ VIRGINIA 0.9% 1,000 Tobacco Settlement Fin Corp VA Asset Bkd....... 5.250 06/01/19 1,021,450 ------------ WASHINGTON 0.5% 510 Skagit Cnty, WA Pub Hosp Dist No 001 Skagit Vy Hosp........................................... 5.250 12/01/10 526,708 ------------ WEST VIRGINIA 1.4% 1,500 West Virginia St Hosp Fin Auth (MBIA Insd)..... 6.100 01/01/18 1,541,715 ------------ WISCONSIN 0.4% 500 Wisconsin St Hlth & Edl Fac Beaver Dam Cmnty Hosp Inc....................................... 5.500 08/15/14 504,875 ------------ TOTAL LONG-TERM INVESTMENTS 96.5% (Cost $108,110,529)...................................................... 109,534,314 SHORT-TERM INVESTMENTS 3.7% (Cost $4,200,000)........................................................ 4,200,000 ------------ TOTAL INVESTMENTS 100.2% (Cost $112,310,529)...................................................... 113,734,314 LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%).............................. (228,671) ------------ NET ASSETS 100.0%......................................................... $113,505,643 ============
Percentages are calculated as a percentage of net assets. * Zero coupon bond (a) The Fund owns 100% of the outstanding bond issuance. 16 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued (b) All or a portion of these securities have been physically segregated in connection with open futures contracts. (c) Securities purchased on a when-issued or delayed delivery basis. (d) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 1.9% of net assets. 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. Radian--Radian Asset Assurance XLCA--XL Capital Assurance Inc. FUTURES CONTRACTS OUTSTANDING AS OF MARCH 31, 2006:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 5-Year Futures June 2006 (Current Notional Value of $104,437 per contract).................. 65 $37,951 == =======
See Notes to Financial Statements 17 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2006 (Unaudited) ASSETS: Total Investments (Cost $112,310,529)....................... $113,734,314 Cash........................................................ 122,667 Receivables: Interest.................................................. 1,489,983 Fund Shares Sold.......................................... 116,129 Other....................................................... 135,880 ------------ Total Assets............................................ 115,598,973 ------------ LIABILITIES: Payables: Investments Purchased..................................... 1,569,990 Income Distributions...................................... 76,424 Fund Shares Repurchased................................... 72,286 Distributor and Affiliates................................ 43,966 Investment Advisory Fee................................... 38,988 Variation Margin on Futures............................... 3,047 Trustees' Deferred Compensation and Retirement Plans........ 195,277 Accrued Expenses............................................ 93,352 ------------ Total Liabilities....................................... 2,093,330 ------------ NET ASSETS.................................................. $113,505,643 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $111,745,194 Net Unrealized Appreciation................................. 1,461,736 Accumulated Undistributed Net Investment Income............. 165,121 Accumulated Net Realized Gain............................... 133,592 ------------ NET ASSETS.................................................. $113,505,643 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $81,660,331 and 7,739,224 shares of beneficial interest issued and outstanding)............. $ 10.55 Maximum sales charge (4.75%* of offering price)......... .53 ------------ Maximum offering price to public........................ $ 11.08 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $15,282,098 and 1,429,735 shares of beneficial interest issued and outstanding)............. $ 10.69 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $16,029,881 and 1,521,085 shares of beneficial interest issued and outstanding)............. $ 10.54 ============ Class I Shares: Net asset value and offering price per share (Based on net assets of $533,333 and 50,570 shares of beneficial interest issued and outstanding)........................ $ 10.55 ============
* On sales of $100,000 or more, the sales charge will be reduced. 18 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended March 31, 2006 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 2,590,779 ----------- EXPENSES: Investment Advisory Fee..................................... 294,104 Distribution (12b-1) and Service Fees (Attributed to Classes A, B, and C of $106,034, $17,480 and $82,564, respectively)............................................. 206,078 Registration and Filing Fees................................ 47,122 Shareholder Services........................................ 34,414 Accounting.................................................. 33,420 Legal....................................................... 22,814 Trustees' Fees and Related Expenses......................... 15,654 Custody..................................................... 10,117 Other....................................................... 59,262 ----------- Total Expenses.......................................... 722,985 Investment Advisory Fee Reduction....................... 58,821 Less Credits Earned on Cash Balances.................... 2,587 ----------- Net Expenses............................................ 661,577 ----------- NET INVESTMENT INCOME....................................... $ 1,929,202 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 112,103 Futures................................................... 254,933 ----------- Net Realized Gain........................................... 367,036 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 2,795,009 ----------- End of the Period: Investments............................................. 1,423,785 Futures................................................. 37,951 ----------- 1,461,736 ----------- Net Unrealized Depreciation During the Period............... (1,333,273) ----------- NET REALIZED AND UNREALIZED LOSS............................ $ (966,237) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 962,965 ===========
See Notes to Financial Statements 19 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, 2006 SEPTEMBER 30, 2005 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 1,929,202 $ 3,992,236 Net Realized Gain.................................... 367,036 411,603 Net Unrealized Depreciation During the Period........ (1,333,273) (541,868) ------------ ------------ Change in Net Assets from Operations................. 962,965 3,861,971 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (1,460,057) (2,950,100) Class B Shares..................................... (263,705) (500,423) Class C Shares..................................... (222,826) (447,551) Class I Shares..................................... (10,243) (2,786) ------------ ------------ (1,956,831) (3,900,860) ------------ ------------ Distributions from Net Realized Gain: Class A Shares..................................... (391,473) (111,173) Class B Shares..................................... (76,687) (25,082) Class C Shares..................................... (80,238) (21,027) Class I Shares..................................... (2,627) -0- ------------ ------------ (551,025) (157,282) ------------ ------------ Total Distributions.................................. (2,507,856) (4,058,142) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... (1,544,891) (196,171) ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 14,577,980 35,234,147 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 1,853,306 2,853,082 Cost of Shares Repurchased........................... (23,594,423) (30,577,511) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (7,163,137) 7,509,718 ------------ ------------ TOTAL INCREASE/DECREASE IN NET ASSETS................ (8,708,028) 7,313,547 NET ASSETS: Beginning of the Period.............................. 122,213,671 114,900,124 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $165,121 and $192,750, respectively)............................ $113,505,643 $122,213,671 ============ ============
20 See Notes to Financial Statements 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, ------------------------------------------------ 2006 2005 2004 2003 2002 (B) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $10.69 $10.72 $10.76 $10.86 $10.42 $10.14 ------ ------ ------ ------ ------ ------ Net Investment Income............ .18(c) .36 .37 .38 .42 .49 Net Realized and Unrealized Gain/Loss...................... (.09) (.01) .04 (.03) .44 .23 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .09 .35 .41 .35 .86 .72 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .18 .37 .37 .40 .42 .43 Distributions from Net Realized Gain........................... .05 .01 .08 .05 -0- .01 ------ ------ ------ ------ ------ ------ Total Distributions................ .23 .38 .45 .45 .42 .44 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $10.55 $10.69 $10.72 $10.76 $10.86 $10.42 ====== ====== ====== ====== ====== ====== Total Return* (a).................. 0.89%** 3.31% 3.84% 3.33% 8.48% 7.19% Net Assets at End of the Period (In millions)........................ $ 81.7 $ 88.2 $ 76.5 $ 70.1 $ 53.5 $ 29.1 Ratio of Expenses to Average Net Assets*.......................... 1.03% .99% .93% .84% .85% .77% Ratio of Net Investment Income to Average Net Assets*.............. 3.38% 3.32% 3.50% 3.55% 4.08% 4.78% Portfolio Turnover................. 6%** 34% 60% 35% 75% 106% * 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........................ 1.13% 1.09% 1.03% 1.04% 1.14% 1.23% Ratio of Net Investment Income to Average Net Assets......... 3.28% 3.22% 3.40% 3.35% 3.79% 4.32%
** Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales 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. (c) Based on average shares outstanding. 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 B SHARES MARCH 31, ----------------------------------------------------- 2006 2005 2004 2003 2002 (B) 2001 --------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $10.82 $10.75 $10.78 $10.84 $10.41 $10.13 ------ ------ ------ ------ ------ ------ Net Investment Income......... .18(e) .40 .30 .32 .35 .42 Net Realized and Unrealized Gain/Loss................... (.08) (.03) .04 (.01) .42 .22 ------ ------ ------ ------ ------ ------ Total from Investment Operations.................... .10 .37 .34 .31 .77 .64 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income........... .18 .29 .29 .32 .34 .35 Distributions from Net Realized Gain............... .05 .01 .08 .05 -0- .01 ------ ------ ------ ------ ------ ------ Total Distributions............. .23 .30 .37 .37 .34 .36 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................ $10.69 $10.82 $10.75 $10.78 $10.84 $10.41 ====== ====== ====== ====== ====== ====== Total Return* (a)............... 0.91%**(d) 3.47%(d) 3.15%(d) 2.96%(c) 7.61% 6.42% Net Assets at End of the Period (In millions)................. $ 15.3 $ 16.9 $ 20.3 $ 23.9 $ 17.1 $ 11.1 Ratio of Expenses to Average Net Assets*....................... 1.00%(d) .82%(d) 1.67%(d) 1.59% 1.60% 1.52% Ratio of Net Investment Income to Average Net Assets*........ 3.41%(d) 3.51%(d) 2.76%(d) 3.08%(c) 3.34% 4.02% Portfolio Turnover.............. 6%** 34% 60% 35% 75% 106% * 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................. 1.10%(d) .92%(d) 1.77%(d) 1.79% 1.89% $1.98% Ratio of Net Investment Income to Average Net Assets..................... 3.31%(d) 3.41%(d) 2.66%(d) 2.88%(c) 3.05% 3.56%
** Non-Annualized (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within the first and second year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (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 7). (e) Based on average shares outstanding. 22 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 C SHARES MARCH 31, ----------------------------------------------- 2006 2005 2004 2003 2002 (B) 2001 ------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD............................ $10.68 $10.70 $10.73 $10.82 $10.40 $10.12 ------ ------ ------ ------ ------ ------ Net Investment Income............. .14(e) .29 .30 .30 .34 .42 Net Realized and Unrealized Gain/Loss....................... (.09) (.01) .04 (.02) .42 .22 ------ ------ ------ ------ ------ ------ Total from Investment Operations.... .05 .28 .34 .28 .76 .64 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.......................... .14 .29 .29 .32 .34 .35 Distributions from Net Realized Gain............................ .05 .01 .08 .05 -0- .01 ------ ------ ------ ------ ------ ------ Total Distributions................. .19 .30 .37 .37 .34 .36 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD............................ $10.54 $10.68 $10.70 $10.73 $10.82 $10.40 ====== ====== ====== ====== ====== ====== Total Return* (a)................... 0.51%** 2.64%(d) 3.17%(d) 2.69%(c) 7.52% 6.42% Net Assets at End of the Period (In millions)......................... $ 16.0 $ 16.5 $ 18.1 $ 21.4 $ 13.2 $ 8.6 Ratio of Expenses to Average Net Assets*........................... 1.78% 1.64%(d) 1.66%(d) 1.59% 1.60% 1.52% Ratio of Net Investment Income to Average Net Assets*............... 2.63% 2.69%(d) 2.77%(d) 2.84%(c) 3.33% 4.02% Portfolio Turnover.................. 6%** 34% 60% 35% 75% 106% * 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......................... 1.88% 1.74%(d) 1.76%(d) 1.79% 1.89% 1.98% Ratio of Net Investment Income to Average Net Assets............. 2.53% 2.59%(d) 2.67%(d) 2.64%(c) 3.04% 3.56%
** 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 7). (e) Based on average shares outstanding. See Notes to Financial Statements 23 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 AUGUST 12, 2005 ENDED (COMMENCEMENT CLASS I SHARES MARCH 31, OF OPERATIONS) 2006 TO SEPTEMBER 30, 2005 ----------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.................. $10.69 $10.70 ------ ------ Net Investment Income................................... .19(b) .05 Net Realized and Unrealized Loss........................ (.08) (.01) ------ ------ Total from Investment Operations.......................... .11 .04 ------ ------ Less: Distributions from Net Investment Income................ .20 .05 Distributions from Net Realized Gain.................... .05 -0- ------ ------ Total Distributions....................................... .25 .05 ------ ------ NET ASSET VALUE, END OF THE PERIOD........................ $10.55 $10.69 ====== ====== Total Return* (a)......................................... 1.01%** 0.38%** Net Assets at End of the Period (In millions)............. $ .5 $ .6 Ratio of Expenses to Average Net Assets*.................. .78% .77% Ratio of Net Investment Income to Average Net Assets*..... 3.63% 3.59% Portfolio Turnover........................................ 6%** 34% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets................ .88% .87% Ratio of Net Investment Income to Average Net Assets... 3.53% 3.49%
** Non-Annualized (a) Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund Shares. (b) Based on average shares outstanding. 24 See Notes to Financial Statements VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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, a Delaware statutory trust, and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to provide investors with a high level of current income exempt from federal income tax, consistent with preservation of capital. The Fund commenced investment operations on May 28, 1993. The Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class specific expenses and voting rights on matters affecting a single class. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Legal expenditures that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. Purchasing securities on this basis involves a risk that the market value at the time of delivery may be lower than the agreed upon purchase price resulting in an unrealized loss. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At March 31, 2006, the Fund had $1,569,990 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 25 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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. At March 31, 2006, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $112,294,798 ============ Gross tax unrealized appreciation........................... $ 1,769,225 Gross tax unrealized depreciation........................... (329,709) ------------ Net tax unrealized appreciation on investments.............. $ 1,439,516 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed at least annually. Distributions from net realized gains for book purposes may include short term capital gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2005 was as follows: Distributions paid from: Ordinary Income........................................... $157,902 Long Term Capital Gains................................... -0- -------- $157,902 ========
As of September 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $413,786
F. EXPENSE REDUCTIONS During the six months ended March 31, 2006, the Fund's custody fee was reduced by $2,587 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, the Adviser will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .50% Over $500 million........................................... .45%
For the six months ended March 31, 2006, the Adviser waived $58,821 of its investment advisory fee. This represents .10% of the Fund's average net assets for the period. This waiver is voluntary in nature and can be discontinued at the Adviser's discretion. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $2,300 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and he and his law firm provide services as legal counsel to the Fund. Under separate Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment agreements, the Adviser provides accounting and legal services and the 26 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $32,300, representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $26,300, 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 approximately $117,100 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2006. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. For the six months ended March 31, 2006, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $21,400 and CDSC on redeemed shares of approximately $14,300. Sales charges do not represent expenses of the Fund. 27 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS For the six months ended March 31, 2006, and the year ended September 30, 2005, transactions were as follows:
FOR THE FOR THE SIX MONTH ENDED YEAR ENDED MARCH 31, 2006 SEPTEMBER 30, 2005 -------------------------- -------------------------- SHARES VALUE SHARES VALUE Sales: Class A........................... 1,174,166 $ 12,476,463 2,799,376 $ 30,055,073 Class B........................... 35,974 386,816 164,518 1,783,449 Class C........................... 159,989 1,697,958 261,414 2,801,679 Class I........................... 1,578 16,743 55,508 593,946 ---------- ------------ ---------- ------------ Total Sales......................... 1,371,707 $ 14,577,980 3,280,816 $ 35,234,147 ========== ============ ========== ============ Dividend Reinvestment: Class A........................... 136,714 $ 1,450,508 209,871 $ 2,252,182 Class B........................... 19,170 206,004 29,127 315,068 Class C........................... 17,355 183,924 26,416 283,046 Class I........................... 1,214 12,870 260 2,786 ---------- ------------ ---------- ------------ Total Dividend Reinvestment......... 174,453 $ 1,853,306 265,674 $ 2,853,082 ========== ============ ========== ============ Repurchases: Class A........................... (1,824,724) $(19,372,486) (1,888,033) $(20,267,308) Class B........................... (187,352) (2,015,432) (524,704) (5,674,515) Class C........................... (200,521) (2,127,583) (432,719) (4,629,779) Class I........................... (7,439) (78,922) (551) (5,909) ---------- ------------ ---------- ------------ Total Repurchases................... (2,220,036) $(23,594,423) (2,846,007) $(30,577,511) ========== ============ ========== ============
4. REDEMPTION FEE The Fund will assess a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within seven days of purchase. The redemption fee is paid directly to the Fund. For the six months ended March 31, 2006, the fund received redemption fees of $14, which are reported as part of "Cost of Shares Repurchased" on the Statement of Changes in Net Assets. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $6,910,775 and $15,598,671 respectively. 6. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund may use derivative instruments for a variety of reasons, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or generate potential gain. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the 28 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Risk may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. During the period, the Fund invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Fund generally invests in exchange traded futures 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 futures 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, 2006, were as follows:
CONTRACTS Outstanding at September 30, 2005........................... 161 Futures Opened.............................................. 243 Futures Closed.............................................. (339) ---- Outstanding at March 31, 2006............................... 65 ====
7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate the Distributor for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $0 and $5,000 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. 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 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 29 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 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. Plaintiffs filed a Motion for Leave to file a Supplemental Pleading that would, among other things, expand the allegations and alleged class. The defendants moved to dismiss this action, which motion was granted in its entirety. Additionally, plaintiffs' Motion for Leave to file a Supplemental Pleading was denied. This matter is now concluded. 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 sought leave to file a second amended derivative complaint 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. Additionally, plaintiff's initial complaint regarding allegations of economic incentives was stayed pending certain procedural developments. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. Defendants' motion to dismiss in the market timing litigation was granted in part and denied in part, and defendants filed a motion for reconsideration of the Court's decision to uphold certain of the plaintiff's claims. Additionally, plaintiff and the named Trustees entered into a tolling agreement. The tolling agreement dismisses the Trustees from the action without prejudice in exchange for tolling all claims against the Trustees. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 9. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 30 VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer J. DAVID GERMANY Vice President DENNIS SHEA Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer PHILLIP G. GOFF Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 31 Van Kampen Intermediate Term Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen Intermediate Term Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen Intermediate Term Municipal Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 138, 338, 538 INF SAR 5/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-01255P-Y03/06 Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen New York Tax Free Income Fund performed during the 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, 2006. 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 3/31/2006
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 CHARGE CHARGES CHARGE CHARGES CHARGE Since Inception 6.29% 5.85% 5.82% 5.82% 5.63% 5.63% 10-year 6.21 5.70 5.66 5.66 5.42 5.42 5-year 5.52 4.49 4.72 4.47 4.72 4.72 1-year 5.01 0.01 4.10 0.15 4.04 3.05 6-month 1.36 -3.45 0.98 -2.92 0.92 -0.06 - -------------------------------------------------------------------------------------------- 30-Day SEC Yield 3.17% 3.64% 3.64% - -------------------------------------------------------------------------------------------- 30-Day SEC Unsubsidized Yield 3.08% 3.16% 3.16%
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. Figures shown above assume reinvestment of all dividends and capital gains. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements the fund's returns would have been lower. SEC yield is a calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. The unsubsidized SEC yields reflect some or all of the expenses that the adviser had voluntarily waived. Yields are subject to change. The Lehman Brothers Municipal Bond Index is generally representative of investment-grade, tax-exempt bonds. The Lehman Brothers NY Municipal Bond Index tracks the performance of NY issued municipal bonds rated at least Baa or BBB by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively and with maturities of 2 years or greater. Indexes do not include any expenses, fees or sales charges, which would lower performance. Indexes are unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Source for index performance: Lipper, Inc. 1 Fund Report FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006 MARKET CONDITIONS Despite the shadow of rising oil prices, the devastation of the Gulf Coast hurricanes, and emerging weakness in the housing market, the economy continued to grow during the six-month period ended March 31, 2006. This expansion was more modest in the fourth quarter of 2005, but gained considerable momentum in the first quarter of 2006. Against the backdrop of growth and good employment data, the Federal Open Market Committee (the "Fed") continued raising the federal funds target rate during the period, implementing four additional increases of 25 basis points each. The final hike of the period represented the fifteenth consecutive increase -- the longest stretch of increases in 25 years. As the period came to a close, market observers speculated about the Fed's near-term intentions, given the central bank's view that although longer-term inflation appeared contained, commodity prices could amplify inflationary pressures. Returns across the municipal bond market varied significantly. As investors sought income opportunities, lower rated bonds outpaced investment-grade bonds by a wide margin. Long-term bonds earned the best returns, broadly speaking, while bonds in the three-to-seven year range posted the most muted gains. Municipal bond issuance was robust during the final months of 2005. (In fact, 2005 marked a record high for municipal bond volume.) The tide changed in the first quarter of 2006, however. As rising rates discouraged issuers from refinancing debt, national municipal issuance dropped versus the same period a year ago. While supply ebbed, the market's appetite for municipal bonds remained strong, with particularly heavy demand from high yield municipal bond funds. Although slowing refunding activity in 2006 contributed to a drop in issuance that was in line with national trends, New York remained a leading issuer of municipal bonds during the period. The state enjoys a good, stable credit outlook, thanks to ongoing economic and fiscal improvements. The securities and tourism industries count among the state's bright spots, as does the real estate market. Manufacturing activity, especially in upstate New York, remains a notable pocket of economic weakness. 2 PERFORMANCE ANALYSIS The fund returned 1.36 percent for the six months ended March 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmarks, the Lehman Brothers Municipal Bond Index, returned 0.98 percent and the Lehman Brothers NY Municipal Bond Index returned 1.03 percent for the period. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2006
- ---------------------------------------------------------------------------------------- LEHMAN BROTHERS LEHMAN BROTHERS CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX NY MUNICIPAL BOND INDEX 1.36% 0.98% 0.92% 0.98% 1.03% - ----------------------------------------------------------------------------------------
The performance for the three share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and index definitions. Throughout the period, we managed the fund according to a long-term "buy and hold" discipline anchored by rigorous research. We sought high quality bonds with attractive return potential and good liquidity. (Liquid securities are those for which there is a robust market of purchasers and sellers.) We sought opportunities to enhance the fund's yield, adding AA rated housing bonds and BBB rated tobacco revenue bonds. Our decision to increase tobacco bond exposure reflected our analytical findings of strong tobacco industry fundamentals and an improving litigation environment. The fund also benefited from its emphasis on bonds with long maturities, as this segment of the market performed most strongly. Our purchases favored bonds with maturities of 25 to 40 years. In contrast, we sold intermediate- and short-term bonds with maturities of 15 years and less. Based on the view that interest rates would continue to rise, with longer-term rates advancing less rapidly, we kept the fund's duration shorter than its benchmark. (Duration is a measure of interest rate sensitivity.) This posture proved advantageous during the period. The fund's portfolio was well-diversified across the major sectors of the municipal bond market. As of the close of the period, the fund's largest allocations were to the general purpose, hospital, student housing, tobacco and higher education sectors. Consistent with our quality-driven approach, 94 percent of bonds in the portfolio carried investment-grade ratings of BBB or higher at the close of the period, while 63 percent were rated AA or higher. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. 3
RATINGS ALLOCATIONS AS OF 3/31/06 AAA/Aaa 41.9% AA/Aa 20.9 A/A 17.1 BBB/Baa 14.2 BB/Ba 2.6 B/B 0.5 NR 2.8 TOP 5 SECTORS AS OF 3/31/06 General Purpose 17.6% Hospital 14.3 Student Housing 8.6 Tobacco-Master Settlement 7.9 Higher Education 7.1
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Sectors are as a percentage of long-term investments. Ratings are as a percentage of total investments. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 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 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 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 (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 6 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 10/1/05 - 3/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. 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* -------------------------------------------------- 10/1/05 3/31/06 10/1/05-3/31/06 Class A Actual.................................... $1,000.00 $1,013.61 $3.66 Hypothetical.............................. 1,000.00 1,021.33 3.68 (5% annual return before expenses) Class B Actual.................................... 1,000.00 1,009.79 7.37 Hypothetical.............................. 1,000.00 1,017.63 7.39 (5% annual return before expenses) Class C Actual.................................... 1,000.00 1,009.16 7.36 Hypothetical.............................. 1,000.00 1,017.63 7.39 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.73%, 1.47%, and 1.47% 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 waiver. Assumes all dividends and distributions were reinvested. 7 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- MUNICIPAL BONDS 98.7% NEW YORK 97.8% $1,290 Albany Cnty, NY Indl Dev Agy Indl Dev Rev Albany College of Pharmacy Ser A.......... 5.625% 12/01/34 $ 1,350,669 330 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van Allen Proj Ser A.......................... 6.875 06/01/39 329,957 1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City of Buffalo Proj (FSA Insd)........... 5.750 05/01/21 1,368,662 1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City of Buffalo Proj (FSA Insd)........... 5.750 05/01/22 1,368,662 1,000 Erie Cnty, NY Tob Asset Sec Corp Ser A.... 5.000 06/01/45 951,410 1,250 Hempstead Town, NY Indl Dev Adelphi Univ Civic Fac................................. 5.750 06/01/22 1,360,950 1,530 Hempstead Town, NY Indl Dev Adelphi Univ Civic Fac................................. 5.000 10/01/35 1,565,435 1,290 Islip, NY Res Recovery Agy Res 1985 Fac Ser E (AMT) (FSA Insd).................... 5.750 07/01/22 1,415,027 1,000 Livingston Cnty, NY Indl Dev Agy Civic Fac Rev Nicholas H Noyes Mem Hosp............. 6.000 07/01/30 1,043,210 1,500 Long Island Pwr Auth NY Elec Sys Rev Gen Ser B..................................... 5.000 12/01/35 1,550,040 2,000 Long Island Pwr Auth NY Elec Sys Rev Gen Ser C..................................... 5.500 09/01/19 2,163,480 1,000 Metropolitan Trans Auth NY Rev Ser A Rfdg (AMBAC Insd).............................. 5.500 11/15/19 1,091,320 1,000 Metropolitan Trans Auth NY Svc Contract Ser A Rfdg................................ 5.125 01/01/29 1,047,180 1,000 Monroe Cnty, NY Indl Dev Agy Nazareth College Rochester Proj (MBIA Insd)........ 5.250 10/01/21 1,068,140 1,320 Montgomery Cnty, NY Indl Dev Agy Lease HFM Boces Ser A (XLCA Insd)................... 5.000 07/01/34 1,361,303 2,425 New York City Fiscal 2003 Ser I........... 5.750 03/01/15 2,658,721 1,500 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (FSA Insd)...................... 5.500 02/15/18 1,620,795 1,000 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (FSA Insd)...................... 5.500 02/15/19 1,080,530 1,000 New York City Hsg Dev Corp Multi-Family Rev Hsg Ser J1............................ 4.850 05/01/36 1,007,970 2,500 New York City Hsg Dev Corp Multi-Family Rev Hsg Ser L (AMT)....................... 5.050 11/01/39 2,522,025 1,000 New York City Hsg Dev Corp Ser A (AMT).... 5.500 11/01/34 1,028,810 465 New York City Indl Dev Agy Civic Fac Rev Cmnty Res Developmentally Disabled........ 7.500 08/01/26 475,746 500 New York City Indl Dev Agy Civic Fac Rev College of New Rochelle Proj.............. 5.750 09/01/17 519,290 500 New York City Indl Dev Agy Civic Fac Rev YMCA Greater NY Proj...................... 6.000 08/01/07 514,680
8 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,405 New York City Indl Dev Agy Fac Rev Royal Charter-NY Presbyterian (FSA Insd)........ 5.375% 12/15/16 $ 1,533,080 1,000 New York City Indl Dev Agy Fac Spl Fac Rev Rols RR II (Inverse Floating Rate) (AMT) (Acquired 12/09/05, Cost $1,114,880) (a)....................................... 7.521 01/01/19 1,132,720 500 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A..................... 6.250 03/01/15 526,575 500 New York City Indl Dev Agy Rev Liberty 7 World Trade Ctr Ser A..................... 6.500 03/01/35 528,450 1,125 New York City Indl Dev Agy Rev Liberty Iac/ Interactivecorp...................... 5.000 09/01/35 1,133,359 500 New York City Indl Dev Agy Spl Fac Rev Amern Airl JFK Intl Arpt (AMT)............ 7.750 08/01/31 554,205 500 New York City Muni Wtr Fin Ser B (b)...... 6.000 06/15/33 546,350 2,500 New York City Ser A....................... 5.500 08/01/20 2,702,325 2,500 New York City Ser G....................... 5.000 08/01/24 2,603,350 2,390 New York City Ser G....................... 5.000 12/01/28 2,461,867 1,000 New York City Ser K....................... 5.000 08/01/24 1,039,640 1,000 New York City Transitional Cultural Res Rev Amern Museum Nat History Ser A (MBIA Insd)..................................... 5.000 07/01/44 1,029,350 1,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser A Rfdg (c)............ 5.500/14.000 11/01/26 1,078,820 1,500 New York City Transitional Fin Auth Rev Future Tax Secd Ser C (AMBAC Insd)........ 5.250 08/01/21 1,603,725 1,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser D (MBIA Insd)......... 5.250 02/01/19 1,072,180 1,540 New York City Transitional Future Tax Secd Ser B..................................... 5.500 02/01/15 1,658,226 2,475 New York Cnty Tob Tr IV Settlement Pass Thru Ser A................................ 5.000 06/01/45 2,354,740 1,060 New York St Dorm Auth Lease Rev Master Boces Pgm (FSA Insd) (d).................. 5.250 08/15/22 1,134,391 1,500 New York St Dorm Auth Lease Rev Muni Hlth Fac Impt Pgm Ser 1 (FSA Insd)............. 5.500 01/15/14 1,608,270 2,000 New York St Dorm Auth Rev Catholic Hlth L.I. Oblig Grp............................ 5.000 07/01/27 2,011,260 1,000 New York St Dorm Auth Rev City Univ Cons Third Ser 1 (FGIC Insd)................... 5.250 07/01/25 1,049,590 1,230 New York St Dorm Auth Rev City Univ Ser D Rfdg (FSA Insd)........................... 5.750 07/01/12 1,330,393 650 New York St Dorm Auth Rev City Univ Sys Cons Ser A................................ 5.625 07/01/16 719,888 1,000 New York St Dorm Auth Rev City Univ Sys Cons Ser B................................ 6.000 07/01/14 1,101,260 1,890 New York St Dorm Auth Rev Dept Ed (d)..... 5.250 07/01/21 2,008,749
See Notes to Financial Statements 9 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $2,000 New York St Dorm Auth Rev FHA Montefiore Hosp (FGIC Insd).......................... 5.000% 08/01/33 $ 2,068,420 1,000 New York St Dorm Auth Rev Insd Brooklyn Law Sch Ser B (XLCA Insd)................. 5.375 07/01/23 1,077,250 1,055 New York St Dorm Auth Rev Insd NY St Rehab Assn Ser A (AMBAC Insd) (d)............... 5.500 07/01/13 1,153,178 1,040 New York St Dorm Auth Rev Insd NY St Rehab Assn Ser A (AMBAC Insd) (d)............... 5.500 07/01/15 1,131,593 1,000 New York St Dorm Auth Rev Insd NY Univ Ser 2 (AMBAC Insd)............................ 5.000 07/01/41 1,020,030 415 New York St Dorm Auth Rev Mental Hlth Svc Ser B (MBIA Insd)......................... 5.250 08/15/31 433,874 1,200 New York St Dorm Auth Rev Miriam Osborn Mem Home Ser B (ACA Insd)................. 6.375 07/01/29 1,303,968 2,000 New York St Dorm Auth Rev Non St Supported Debt Mt Sinai NYU Hlth Ser C.............. 5.500 07/01/26 2,024,900 1,250 New York St Dorm Auth Rev Non St Supported Debt Mtg Hosp Spl Surgery (FHA Gtd)....... 5.000 08/15/29 1,303,137 2,000 New York St Dorm Auth Rev Non St Supported Debt Providence Rest (ACA Insd)........... 5.250 07/01/25 2,094,600 750 New York St Dorm Auth Rev Nursing Home Menorah Campus (FHA Gtd).................. 5.950 02/01/17 779,145 1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser D (MBIA Insd)......................... 5.500 10/01/17 1,090,190 1,000 New York St Dorm Auth Rev Secd Hosp North Gen Hosp Rfdg (MBIA Insd)................. 5.750 02/15/17 1,104,510 1,000 New York St Dorm Auth Rev Secd Hosp North Gen Hosp Rfdg............................. 5.750 02/15/18 1,090,710 1,000 New York St Dorm Auth Rev St Univ Ed Fac 1989 Res (MBIA Insd)...................... 6.000 05/15/15 1,094,130 500 New York St Energy Resh & Dev Auth Gas Fac Rev Brooklyn Union Gas Ser B (Inverse Floating Rate) (AMT)...................... 10.264 07/01/26 526,975 1,000 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fd Pooled Fin Pgm I......................................... 5.250 09/15/19 1,074,420 2,500 New York St Environ Fac Corp St Clean Wtr & Drinking Revolving Fds.................. 5.000 06/15/21 2,621,500 1,250 New York St Hsg Fin Agy St Econ Dev Hsg Ser A (FGIC Insd)......................... 5.000 09/15/34 1,296,375 1,425 New York St Hsg Fin Agy St Personal Income Tax Rev Econ Dev & Hsg Ser A.............. 5.000 09/15/23 1,496,720 2,280 New York St Loc Govt Assist Corp Ser E Rfdg...................................... 6.000 04/01/14 2,587,070
10 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $2,000 New York St Mtg Agy Rev Homeowner Mtg Ser 130 (AMT)................................. 4.800% 10/01/37 $ 2,000,720 700 New York St Mtg Agy Rev Ser 82 (AMT)...... 5.650 04/01/30 705,313 995 New York St Mtg Agy Rev Ser 101 (AMT)..... 5.400 04/01/32 1,020,611 460 New York St Twy Auth Svc Contract Rev Loc Hwy & Brdg................................ 5.500 04/01/16 498,474 500 New York St Urban Dev Corp Rev Correctional Fac Ser A Rfdg............... 5.500 01/01/14 538,235 220 Oneida Cnty, NY Indl Dev Agy Civic Fac Saint Elizabeth Med Ser A................. 5.875 12/01/29 225,749 100 Port Auth NY & NJ Spl Oblig (AMT)......... 7.000 10/01/07 102,077 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 1,043,550 1,000 Rockland Cnty, NY Solid Waste Ser B (AMT) (AMBAC Insd).............................. 5.000 12/15/23 1,031,860 825 Suffolk Cnty, NY Indl Dev Agy Civic Fac Rev Family Svc League Suffolk Cnty (LOC: Fleet National)........................... 5.000 11/01/34 845,625 80 Syracuse, NY Hsg Auth Rev Sub Proj Loretto Rest Ser B................................ 7.500 08/01/10 80,754 250 Syracuse, NY Indl Dev Agy Rev First Mtg Jewish Home Ser A......................... 7.375 03/01/21 268,625 2,000 Tobacco Settlement Fin Corp NY Ser C-1.... 5.500 06/01/22 2,157,420 2,000 Triborough Brdg & Tunl Auth NY Rev Gen Purp Ser A................................ 5.250 01/01/18 2,137,220 325 Triborough Brdg & Tunl Auth NY Rev Gen Purp Ser A................................ 5.000 01/01/32 332,716 1,590 Tsasc Inc. NY Ser 1....................... 5.000 06/01/34 1,546,577 2,500 Tsasc Inc. NY Ser 1....................... 5.125 06/01/42 2,431,675 1,000 Ulster Cnty, NY Res Recovery Agy Solid Waste Sys Rev Rfdg (AMBAC Insd)........... 5.250 03/01/18 1,060,890 1,000 Upper Mohawk Vly Regl Wtr Fin Auth NY Wtr Sys Rev (AMBAC Insd)...................... 5.750 04/01/20 1,084,210 310 Utica, NY Indl Dev Agy Civic Fac Rev Utica College Proj Ser A........................ 5.750 08/01/28 313,103 1,000 Warren & Washington Cnty NY Indl Dev Agy Civic Fac Rev Glens Falls Hosp Proj Ser A (FSA Insd)................................ 5.000 12/01/35 1,030,420 500 Westchester Cnty, NY Indl Dev Agy Mtg Kendal on Hudson Proj Ser A............... 6.375 01/01/24 532,010 2,000 Westchester Tob Asset Sec Corp NY......... 5.125 06/01/45 1,940,720 1,000 Western Nassau Cnty, NY Wtr Auth Wtr Sys Rev (AMBAC Insd).......................... 5.000 05/01/26 1,045,630
See Notes to Financial Statements 11 VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $1,000 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty Dev Ppty Yonkers Inc Ser A (Prerefunded @ 02/01/11).................. 6.625% 02/01/26 $ 1,129,820 ------------ 118,463,474 ------------ U. S. VIRGIN ISLANDS 0.9% 1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt Taxes Ln Nt Ser A......................... 6.375 10/01/19 1,102,250 ------------ TOTAL LONG-TERM INVESTMENTS 98.7% (Cost $116,193,804)........................................................ 119,565,724 SHORT-TERM INVESTMENT 0.4% (Cost $400,000)............................................................ 400,000 ------------ TOTAL INVESTMENTS 99.1% (Cost $116,593,804)........................................................ 119,965,724 OTHER ASSETS IN EXCESS OF LIABILITIES 0.9%.................................. 1,145,831 ------------ NET ASSETS 100.0%........................................................... $121,111,555 ============
Percentages are calculated as a percentage of net assets. (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 0.94% of net assets. (b) All or a portion of this security has been physically segregated in connection with open futures contracts. (c) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (d) The Fund owns 100% of the outstanding bond issuance. ACA -- American Capital Access AMBAC -- AMBAC Indemnity Corp. AMT -- Alternative Minimum Tax FGIC -- Financial Guaranty Insurance Co. FHA -- Federal Housing Administration FSA -- Financial Security Assurance Inc. LOC -- Letter of Credit MBIA -- Municipal Bond Investors Assurance Corp. XLCA -- XL Capital Assurance Inc. 12 See Notes to Financial Statements VAN KAMPEN NEW YORK TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS -- MARCH 31, 2006 (UNAUDITED) continued FUTURES CONTRACTS OUTSTANDING AS OF MARCH 31, 2006:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION --------- ------------- SHORT CONTRACTS: U.S. Treasury Notes 5-Year Futures June 2006 (Current Notional Value of $104,438 per contract).................. 139 $66,401 === =======
See Notes to Financial Statements 13 VAN KAMPEN NEW YORK TAX FREE INCOME FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2006 (Unaudited) ASSETS: Total Investments (Cost $116,593,804)....................... $119,965,724 Cash........................................................ 50,960 Receivables: Interest.................................................. 1,586,980 Investments Sold.......................................... 70,000 Fund Shares Sold.......................................... 68,842 Other....................................................... 88,339 ------------ Total Assets............................................ 121,830,845 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 287,860 Income Distributions...................................... 108,520 Distributor and Affiliates................................ 79,668 Investment Advisory Fee................................... 22,630 Variation Margin on Futures............................... 6,516 Trustees' Deferred Compensation and Retirement Plans........ 138,432 Accrued Expenses............................................ 75,664 ------------ Total Liabilities....................................... 719,290 ------------ NET ASSETS.................................................. $121,111,555 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $117,062,288 Net Unrealized Appreciation................................. 3,438,321 Accumulated Undistributed Net Investment Income............. 378,069 Accumulated Net Realized Gain............................... 232,877 ------------ NET ASSETS.................................................. $121,111,555 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $72,375,361 and 4,455,087 shares of beneficial interest issued and outstanding)............. $ 16.25 Maximum sales charge (4.75%* of offering price)......... .81 ------------ Maximum offering price to public........................ $ 17.06 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $31,012,246 and 1,913,528 shares of beneficial interest issued and outstanding)............. $ 16.21 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $17,723,948 and 1,092,472 shares of beneficial interest issued and outstanding)............. $ 16.22 ============
* 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, 2006 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 2,820,313 ----------- EXPENSES: Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $87,180, $163,063 and $88,807, respectively)............................................. 339,050 Investment Advisory Fee..................................... 279,663 Shareholder Services........................................ 31,690 Legal....................................................... 21,260 Trustees' Fees and Related Expenses......................... 13,877 Custody..................................................... 9,814 Other....................................................... 73,647 ----------- Total Expenses.......................................... 769,001 Investment Advisory Fee Reduction....................... 148,757 Less Credits Earned on Cash Balances.................... 1,812 ----------- Net Expenses............................................ 618,432 ----------- NET INVESTMENT INCOME....................................... $ 2,201,881 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 96,993 Futures................................................... 488,659 ----------- Net Realized Gain........................................... 585,652 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 4,846,831 ----------- End of the Period: Investments............................................. 3,371,920 Futures................................................. 66,401 ----------- 3,438,321 ----------- Net Unrealized Depreciation During the Period............... (1,408,510) ----------- NET REALIZED AND UNREALIZED LOSS............................ $ (822,858) ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,379,023 ===========
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, 2006 SEPTEMBER 30, 2005 -------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................ $ 2,201,881 $ 4,216,652 Net Realized Gain.................................... 585,652 2,081,074 Net Unrealized Depreciation During the Period........ (1,408,510) (1,745,917) ------------ ------------ Change in Net Assets from Operations................. 1,379,023 4,551,809 ------------ ------------ Distributions from Net Investment Income: Class A Shares..................................... (1,344,646) (2,448,929) Class B Shares..................................... (517,357) (1,124,558) Class C Shares..................................... (281,478) (547,665) ------------ ------------ (2,143,481) (4,121,152) ------------ ------------ Distributions from Net Realized Gain: Class A Shares..................................... (1,332,049) -0- Class B Shares..................................... (632,017) -0- Class C Shares..................................... (347,951) -0- ------------ ------------ (2,312,017) -0- ------------ ------------ Total Distributions.................................. (4,455,498) (4,121,152) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................................... (3,076,475) 430,657 ------------ ------------ FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................ 12,037,744 20,984,248 Net Asset Value of Shares Issued Through Dividend Reinvestment....................................... 3,269,351 2,899,167 Cost of Shares Repurchased........................... (10,921,400) (22,740,048) ------------ ------------ NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 4,385,695 1,143,367 ------------ ------------ TOTAL INCREASE IN NET ASSETS......................... 1,309,220 1,574,024 NET ASSETS: Beginning of the Period.............................. 119,802,335 118,228,311 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $378,069 and $319,669, respectively)............................ $121,111,555 $119,802,335 ============ ============
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, ----------------------------------------------- 2006 2005 2004 2003 2002 (a) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $16.67 $16.60 $16.40 $16.49 $15.76 $14.91 ------ ------ ------ ------ ------ ------ Net Investment Income.......... .33 .64 .65 .69 .74 .73 Net Realized and Unrealized Gain/Loss.................... (.11) .06 .17 (.10) .73 .88 ------ ------ ------ ------ ------ ------ Total from Investment Operations..................... .22 .70 .82 .59 1.47 1.61 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............ .32 .63 .62 .68 .74 .76 Distributions from Net Realized Gain......................... .32 -0- -0- -0- -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions.............. .64 .63 .62 .68 .74 .76 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD......................... $16.25 $16.67 $16.60 $16.40 $16.49 $15.76 ====== ====== ====== ====== ====== ====== Total Return* (b)................ 1.36%** 4.29% 5.13% 3.69% 9.63% 10.97% Net Assets at End of the Period (In millions).................. $ 72.4 $ 67.8 $ 62.2 $ 63.6 $ 47.5 $ 43.5 Ratio of Expenses to Average Net Assets*........................ .73% .76% .76% .55% .38% .53% Ratio of Net Investment Income to Average Net Assets*............ 4.02% 3.87% 3.94% 4.19% 4.68% 4.74% Portfolio Turnover............... 18%** 41% 15% 27% 43% 30% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets.................. .98% 1.01% 1.09% 1.06% 1.07% 1.13% Ratio of Net Investment Income to Average Net Assets....... 3.77% 3.62% 3.60% 3.68% 3.99% 4.14%
** 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. 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 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, ----------------------------------------------- 2006 2005 2004 2003 2002 (a) 2001 -------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $16.63 $16.58 $16.38 $16.47 $15.74 $14.90 ------ ------ ------ ------ ------ ------ Net Investment Income.......... .27 .52 .52 .56 .62 .62 Net Realized and Unrealized Gain/Loss.................... (.11) .04 .18 (.09) .73 .86 ------ ------ ------ ------ ------ ------ Total from Investment Operations..................... .16 .56 .70 .47 1.35 1.48 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income............ .26 .51 .50 .56 .62 .64 Distributions from Net Realized Gain......................... .32 -0- -0- -0- -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions.............. .58 .51 .50 .56 .62 .64 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD......................... $16.21 $16.63 $16.58 $16.38 $16.47 $15.74 ====== ====== ====== ====== ====== ====== Total Return* (b)................ .98%** 3.40% 4.36% 2.93% 8.83% 10.09% Net Assets at End of the Period (In millions).................. $ 31.0 $ 33.9 $ 38.6 $ 40.5 $ 40.5 $ 35.0 Ratio of Expenses to Average Net Assets*........................ 1.47% 1.51% 1.51% 1.29% 1.13% 1.28% Ratio of Net Investment Income to Average Net Assets*............ 3.27% 3.12% 3.19% 3.45% 3.92% 3.99% Portfolio Turnover............... 18%** 41% 15% 27% 43% 30% * 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.................. 1.72% 1.76% 1.84% 1.80% 1.82% 1.88% Ratio of Net Investment Income to Average Net Assets....... 3.02% 2.87% 2.85% 2.94% 3.24% 3.39%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 4%, charged on certain redemptions made within one year of purchase and declining to 0% after the sixth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees 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. 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, -------------------------------------------- 2006 2005 2004 2003 2002 (a) 2001 --------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD........................... $16.65 $16.59 $16.39 $16.48 $15.75 $14.91 ------ ------ ------ ------ ------ ------ Net Investment Income............ .26 .52 .52 .56 .62 .60 Net Realized and Unrealized Gain/Loss...................... (.11) .05 .18 (.09) .73 .88 ------ ------ ------ ------ ------ ------ Total from Investment Operations... .15 .57 .70 .47 1.35 1.48 ------ ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income......................... .26 .51 .50 .56 .62 .64 Distributions from Net Realized Gain........................... .32 -0- -0- -0- -0- -0- ------ ------ ------ ------ ------ ------ Total Distributions................ .58 .51 .50 .56 .62 .64 ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........................... $16.22 $16.65 $16.59 $16.39 $16.48 $15.75 ====== ====== ====== ====== ====== ====== Total Return* (b).................. .92%**(d) 3.46%(d) 4.36% 2.92%(c) 8.83% 10.09% Net Assets at End of the Period (In millions)........................ $ 17.7 $ 18.1 $ 17.5 $ 17.7 $ 12.0 $ 7.3 Ratio of Expenses to Average Net Assets*.......................... 1.47%(d) 1.47%(d) 1.51% 1.30% 1.13% 1.30% Ratio of Net Investment Income to Average Net Assets*.............. 3.27%(d) 3.14%(d) 3.19% 3.45%(c) 3.92% 3.97% Portfolio Turnover................. 18%** 41% 15% 27% 43% 30% * 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........................ 1.72%(d) 1.72%(d) 1.84% 1.81% 1.82% 1.90% Ratio of Net Investment Income to Average Net Assets......... 3.02%(d) 2.89%(d) 2.85% 2.94%(c) 3.23% 3.37%
** Non-Annualized (a) As required, effective October 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on fixed income securities. The effect of this change for the year ended September 30, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for periods prior to September 30, 2002 have not been restated to reflect this change in presentation. (b) Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1% charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the Total Return and Ratio of Net Investment Income to Average Net Assets of .03%. (d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See Footnote 7). See Notes to Financial Statements 19 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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 seek to provide investors with a high level of current income exempt from federal, New York State and New York City income taxes, consistent with preservation of capital. The Fund seeks to achieve its investment objective by investing at least 80% of its total assets in a portfolio of New York municipal securities that are rated investment grade at the time of purchase. The Fund commenced investment operations on July 29, 1994. The Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class-specific expenses and voting rights on matters affecting a single class. As of March 31, 2006, there have been no sales of Class I Shares. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Future contracts are valued at the settlement price established each day on the exchange on which they are traded. 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, 2006, there were no 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. 20 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (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, 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. During the prior fiscal year, the Fund utilized capital losses carried forward of $78,198. At March 31, 2006, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $116,579,104 ============ Gross tax unrealized appreciation........................... $ 3,515,253 Gross tax unrealized depreciation........................... (128,633) ------------ Net tax unrealized appreciation on investments.............. $ 3,386,620 ============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains and gains on futures transactions. All short-term capital gains and a portion of futures gains are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended September 30, 2005 was as follows: Distributions paid from: Ordinary income........................................... $384 Long-term capital gain.................................... -0- ---- $384 ----
As of September 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 73,859 Undistributed long-term capital gain........................ $2,033,570
F. EXPENSE REDUCTION During the six months ended March 31, 2006, the Fund's custody fee was reduced by $1,812 as a result of credit earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... .470% Over $500 million........................................... .445%
21 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued For the six months ended March 31, 2006, the Adviser voluntarily waived $148,757 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, 2006, the Fund recognized expenses of approximately $2,300, 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 Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment agreements, the Adviser provides accounting and legal services and the CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $29,400, representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended March 31, 2006, the Fund recognized expenses of approximately $24,800 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are 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 $68,492 are included in "Other" assets on the Statement of Assets and Liabilities at March 31, 2006. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. For the six months ended March 31, 2006, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $20,100 and CDSC on redeemed shares of approximately $22,900. Sales charges do not represent expenses of the Fund. 22 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued 3. CAPITAL TRANSACTIONS For the six months ended March 31, 2006 and the year ended September 30, 2005, transactions were as follows:
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED MARCH 31, 2006 SEPTEMBER 30, 2005 ------------------------ -------------------------- SHARES VALUE SHARES VALUE Sales: Class A............................. 629,770 $ 10,342,645 948,370 $ 15,809,067 Class B............................. 48,336 792,642 104,295 1,729,569 Class C............................. 55,107 902,457 207,093 3,445,612 -------- ------------ ---------- ------------ Total Sales........................... 733,213 $ 12,037,744 1,259,758 $ 20,984,248 ======== ============ ========== ============ Dividend Reinvestment: Class A............................. 118,756 $ 1,938,812 103,277 $ 1,720,306 Class B............................. 53,484 870,821 46,953 780,802 Class C............................. 28,202 459,718 23,912 398,059 -------- ------------ ---------- ------------ Total Dividend Reinvestment........... 200,442 $ 3,269,351 174,142 $ 2,899,167 ======== ============ ========== ============ Repurchases: Class A............................. (360,824) $ (5,927,605) (731,919) $(12,170,713) Class B............................. (227,695) (3,728,436) (437,927) (7,282,119) Class C............................. (77,401) (1,265,359) (197,540) (3,287,216) -------- ------------ ---------- ------------ Total Repurchases..................... (665,920) $(10,921,400) (1,367,386) $(22,740,048) ======== ============ ========== ============
4. REDEMPTION FEE The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within seven days of purchase. The redemption fee is paid directly to the Fund. For the six months ended March 31, 2006, the Fund did not receive any redemption fees. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $25,289,631 and $21,280,500, respectively. 6. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Fund may use derivative instruments for a variety of reasons such as to attempt to protect the Fund against possible changes in the market value of its portfolio and to manage the portfolio's effective maturity and duration. All of the Fund's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures 23 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Summarized below are the different types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS During the period, the Fund invested in futures contracts, a type of derivative. 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, 2006 are as follows:
CONTRACTS Outstanding at September 30, 2005........................... 237 Futures Opened.............................................. 510 Futures Closed.............................................. (608) ---- Outstanding at March 31, 2006............................... 139 ====
B. INDEXED SECURITY An inverse floating rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Fund to enhance the yield of the portfolio. These securities are identified on the Portfolio of Investments. 7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate the Distributor for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $181,100 and $0 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the 24 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. 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 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. Plaintiffs filed a Motion for Leave to file a Supplemental Pleading that would, among other things, expand the allegations and alleged class. The defendants moved to dismiss this action, which motion was granted in its entirety. Additionally, plaintiffs' motion for Leave to file a Supplemental Pleading was denied. This matter is now concluded. 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 sought leave to file a second amended derivative complaint 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. Additionally, plaintiff's initial complaint regarding allegations of economic incentives was stayed pending certain procedural developments. The defendants have moved to dismiss each of these actions and otherwise intend to defend them vigorously. Defendants' motion to dismiss in the market timing litigation was granted in part and denied in part, and defendants filed a motion for reconsideration of the Court's decision to uphold certain of the plaintiff's claims. Additionally, plaintiff and the 25 VAN KAMPEN NEW YORK TAX FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2006 (UNAUDITED) continued named Trustees entered into a tolling agreement. The tolling agreement dismisses the Trustees from the action without prejudice in exchange for tolling all claims against the Trustees. While the defendants believe that they have meritorious defenses, the ultimate outcome of these matters is not presently determinable, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 9. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 26 VAN KAMPEN NEW YORK TAX FREE INCOME FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer J. DAVID GERMANY Vice President DENNIS SHEA Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer PHILLIP G. GOFF Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS, INC. 1221 Avenue of the Americas New York, New York 10020 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 27 Van Kampen New York Tax Free Income Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen New York Tax Free Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen New York Tax Free Income Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 235,325,425 NYTF SAR 5/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-01256P-Y03/06 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-CSRS was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (1) Code of Ethics -- Not applicable for semi-annual reports. (2)(a) A certification for the Principal Executive Officer of the registrant is attached hereto as part of EX-99.CERT. (2)(b) A certification for the Principal Financial Officer of the registrant is attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen Tax Free Trust By: /s/ Ronald E. Robison ---------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: May 18, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison ---------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: May 18, 2006 By: /s/ Phillip G. Goff -------------------- Name: Phillip G. Goff Title: Principal Financial Officer Date: May 18, 2006 EX-99.CERT 2 c04350exv99wcert.txt CERTIFICATION I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSRS of Van Kampen Tax Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: May 18, 2006 /s/ Ronald E. Robison --------------------- Principal Executive Officer I, Phillip G. Goff, certify that: 1. I have reviewed this report on Form N-CSRS of Van Kampen Tax Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: May 18, 2006 /s/ Phillip G. Goff -------------------- Principal Financial Officer EX-99.906CERT 3 c04350exv99w906cert.txt CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Tax Free Trust In connection with the Report on Form N-CSRS (the "Report") of the above-named issuer for the period ended March 31, 2006 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: May 18, 2006 /s/ Ronald E. Robison --------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Tax Free Trust and will be retained by Van Kampen Tax Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Tax Free Trust In connection with the Report on Form N-CSRS (the "Report") of the above-named issuer for the period ended March 31, 2006 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: May 18, 2006 /s/ Phillip G. Goff ------------------- Phillip G. Goff Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Tax Free Trust and will be retained by Van Kampen Tax Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. -----END PRIVACY-ENHANCED MESSAGE-----